I don't know what the _ulx_physgun field on the player is, but if I had to guess, it makes it so when a player spawns if that field is not nil, it sets their location to _ulx_physgun.p and then freezes them (MOVETYPE_NONE means no moving)
So in the context of the add-on, I'd guess that it prevents people from killing themselves to get out of being frozen by resetting their position after spawning.