In their context, these continued the pattern of differentiating the Israelites from the pagan cultures around them. The commands against mixing textiles or seeds was directed against pagan beliefs that by mixing un-like things, it created a "magical" combination. Cross-dressing was a component of pagan worship, as was sexual promiscuity. Tassels on their garments were intended to let people around them know that these were followers of God, much like wearing a Christian t-shirt, or putting a sign of the fish on your car.
The point of publicly identifying yourself as a follower of God was to be an example to others of God's blessing. Notice that even the command (considered the "least" by some Rabbi's) to protect the mother bird when you take the young, brings with it a promise of blessing. The idea behind wearing tassels on their cloak was that as others saw the tassels, associated you with following God, and saw your behavior and God's blessing, they would be encouraged to follow God as well.
Oh, how we modern followers have reversed that plan! We're happy to be identified by our sign of the fish or church bumper sticker, but then cut people off in traffic or demonstrate road rage. We like to leave a little tract for our server... but minimize the tip or stiff them if the service doesn't meet our standard. We wear cross jewelry or have a verse on the wall of our office, and then fail to work as if unto the Lord or spend our time gossiping about co-workers.
Instead of others being encouraged to follow God, too often they view our example and want no part of the faith we claim to have.
While our salvation isn't based on our works, but rather on the finished work of Christ, our works may be an obstacle to the salvation of those around us. This chapter reminds us that the world is watching, and we're setting an example, whether for good or for evil.