Spacing the pipe away from the cylinder effectivly lengthens the head pipe. This in turn "lowers" where the powerband is. 5-10mm is usually all you would go. This would lower were the power sits anywhere from maybe 150-400 rpm. That means a little more lowend, midrange hit comes in a bit sooner, and it signs off on top earlier.
Picture a dyno run of a bike. Now slide the curve a few hundred rpm closer to the Y-axis. That's a very basic idea of what a spacer would do.
And don't throw any old washer in there. The opening in the center must match the pipe's opening. It's more of a spacer ring than a washer. Seems pretty common sence, but I remember a kid wanting to put a fender washer in for a spacer (large outer diameter, tiny little hole in the middle).