This article is from the eBay FAQ, by William B. Shaw firstname.lastname@example.org with numerous contributions by others.
Reserves perform two important roles on eBay. First, they protect the value
of your item. Second, the BIN price is maintained until the reserve is met
preventing a buyer from eliminating your BIN price with a low, starting bid.
Many sellers believe that reserves reduce the number of bidders and hurt
your final fee. Other sellers believe the opposite-by starting an auction
with a low price and a reasonable reserve, you will attract early bidding
and bidders will gravitate to your auction (i.e. bids beget bids). You'll
have to experiment a bit to see what works for you.
Remember that your fees are higher for items that don't reach the reserve
price. As a general rule, if you are selling items that have a large bidder
pool, reserves are unnecessary since the bidding usually reaches a fair
price. If your items only receive a few bids, you'll either need to use
reserves or start your auctions at the minimum price you are willing to
accept for the item.