Hello Kev,
It certainly does work. If you read the instructions on a lot of barber hones, they say something like "...use wet, dry or with lather..." the lather seems to have a sort of cushioning effect that gives a finer edge. It also helps keep the blade on the hone (increases the suction a bit probably) and conversely aids you in obtaining a lighter honing action - pressing down on the razor is bad news, especially on the higher grit hones, and anathema on the polishing stone - you want a really light touch and the lather helps you to achieve this.
Until I started using naniwa ss hones I routinely added a few drops of detergent to my water bottle - not enough to froth it up, but just enough to add a bit of slip. Naniwa recommends against using stuff like that, so after using if for a while on them I stopped doing so - just to see what would happen. It took about a month of using plain water to get all the detergent out of the stones, so perhaps they have a point!
For harder stones, and that includes all the naturals I can think of (with the possible exception of japanese naturals, a lather (just plain shaving lather) is fine.
Regards,
Neil