In plain English, the execution of the program is done in the background. Yu may have noticed that if you type, say find /usr/local -name httpd.conf, the shell will not return to a prompt until the find completes. The & allows the control immediately be returned to the console, freeing you to do whatever you want while the find command will be done in the background. Of course the the find will do nothing for you because the output is suppressed (it will not be shown on the screen) unless you concatenate the result to a file for example.
In your case, if twm is started without the &, control will not be passed to you and you're left with a dangling screen, or whatever the term the call it. Perhaps some aspect of twm require it to be started with a &, because there are two xterm lines after the twm that needs to retain control. I'm putting out a wild guess that if twm stays in the foreground, you'll not be able to see and interact with the two xterm console screens.
In my .xinitrc, startkde line does not have & appended to it so I assume, the control is automatically passed immediately to the caller after the execution.