A content audit for SEO (also known as "Content Pruning") crawls at all the indexable pages on your site and discovers pages that are competing with each other for keywords and recommends which pages to combine, redirect or noindex / delete. It also discovers pages that should not be in the google index such as tags, archives or simply thin content that has no traffic or links.
A content audit will improve the overall trust and qualify of a domain in the eyes of Google in a post-Panda world. It will optimize crawl budget so that the most important pages of your site get updated more often in the Google index. And it will improve the flow of link equity throughout the site. A content audit is the first thing a new content site owner should perform, before thinking about creating new content or building new links. Using tools such as Sitebuld you can generate awesome crawl maps (shown below) to visualise your current site structure and see how much of a mess it may be.
The best example is how Quickbooks nearly doubled its traffic by deleting half its content in this content pruning case study. Index bloat is a real issue especially when caused by bugs in SEO plugins such as Yoast. Two other examples are shown below.