The purpose of this is obvious - so the recipient can decide how urgent, if at all, it is for him or her to run to the post office and wait in line for the piece of mail.
The law exempts government offices, the police, fire and rescue services, courts and batei din from this law and would allow them to continue sending registered mail without the identifying information - and just state the sender as "the State of Israel". I guess the idea here is that people might prefer to not go pick up the mail if they suspect it might be a bill from the fire services or a fine from the police or a court order or whatnot.
source: Knesset
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