Not just Austin, they're just the most recent city using this service in a city wide effort to reduce landfill/recycling cost by stopping completely unwanted material from entering the waste stream in the first place.
Other cities doing this include San Jose, CA.; Cambridge, MA.; Santa Fe, NM; Chicago, IL; Seattle, WA; and Berkeley, CA.
The idea is to provide a central blacklist to stop residents from receiving junk mail. Given that a significant portion of our household waste is junk mail despite my best efforts at cutting it down. At least 3/4 of what arrives at my door goes straight into the roundfile without even being looked at beyond seeing a "presort-standard" postage. This represents a tremendous amount of material.
Yes we could all go and register individually with the catalogs, the DMA, the phone books, the credit card companies...and chase down the rest... and repeat every 3 years because it expires... but having a one-stop central opt-out is a really nice service that could really help make a dent in the problem.