If the lid leaks too fast, or comes ajar, one gets a bonfire, way too much nasty smoke. The idea is to prevent combustion inside the pot.
I came up with this design after experiments with making charcoal. A classic way to make charcoal is to start a fire underneath a sealed chamber filled with wood, with holes on the bottom. Soon the wood gases from the chamber catch fire, and the starter fire underneath isn't needed. When the gases go out, one has charcoal inside the chamber. If there was instead a leak allowing convection through the chamber, one has ash inside the chamber.
The idea of the holes in the bottom is to pass the wood gases through our charcoal fire, to use them as fuel and burn them off. This is a grace note of uncertain benefit. It is possible that an unsealed lid, and no holes on the bottom, would work nearly as well. I can't suggest that now without getting pilloried, after encouraging others to destroy cast iron pots with their drills? Think of it like adding the egg to cake mix, isn't it nice being involved?
I've read of various very expensive setups at high end barbecue restaurants, such as Danny Meyer's Blue Smoke. Were it me, I'd design a central chamber for heating wood as one makes charcoal, and feed the fumes to "gas" ovens throughout the kitchen. I'm surprised no one has tried this. Different gas sources require different treatment (not all propane torches can handle MAPP gas), and there could be residue buildup one doesn't get with natural gas, but this seems like an engineering problem worth solving. (I doubt one could even get permits for this in a city like New York.) I got a kick out of Austin Franklin's book proposing that I make a cooker from a 1,000 gallon propane tank using "basic metal-working skills." If I had these skills and enough space, this would be my idea for offset firebox cooking.
Of course, Dennis has tried this, his new cold smoker is roughly this idea. For cold smoking, one doesn't need to burn the wood gases, just expose the meat to them. For hot smoking we have other clean fuel sources. Relying entirely on wood gases for heat might be too much smoke (in my idea above, one could blend at will with natural gas, to get the smoke flavor just right) and would require a larger chamber.