When light touches your lens, all kinds of bad things happen. Any dirt trapped in the elements is lit, and might be photographed (I've seen badly flared news footage where I could see the front element of the lens spinning as the focus shifted because the dirt on the front was lit.) You've pretty much nailed what a matte box can do for you. The importance of a matte box, especially with pro-sumer lenses cannot be overstated. A matte box will not help save you from a practical light (one that is in your shot), but that's not usually such a big deal, since the flare is motivated by the light you see. Your worst flares come from off-camera, and skip down the sides of the optics, bouncing off the metal or plastic parts inside the lens and not really showing up as a "flare". The way they show up is in a decrease in contrast. Indirect light flares your blacks and makes them "milky". Sometimes this light "wraps" your subject and makes it difficult to see details. A matte box prevents a lot of this extraneous light from hitting the front element of the lens and bouncing around. It's also a great place for filters, but that's secondary. We always keep one on the cameras except when it is absolutely necessary to take it off (for macro work, for instance) even though professional lenses are coated extremely well and are very difficult to flare. Unless you're lighting everything from behind the camera (ugh) you need a matte box.

Hey Focus thanks for the reply to Jays message. It helped me out a lot. Hey Jay how do you like your XL1-s? I just got mine a few weeks ago and am still figuring it out. So far it rocks! Any advice or wisdom you may have on the camera would be great.

Zig