http://www.pc.ibm.com/qtechinfo/MIGR-4R4SC9.html When operating at highest CPU speed and with high current usage peripherals attached (CardBus cards, USB devices, etc.), the required operating current may momentarily exceed the capability of the AC Adapter. When the battery is installed, the battery can supplement the power during the momentary peaks.
When the battery is removed from the ThinkPad computer, it switches to "Battery Optimized" speed (lower speed) to reduce peak power demands and to prevent the possibility of input voltage dropping too low, causing the ThinkPad computer to power off.