Blistering does cause inflammation, fairly superficial, but not entirely superficial. Bringing blood to an area does drive healing, further, faster, more thorough healing. Blistering won’t “tighten legs” (actually does the opposite), or “prevent soreness” (actually causes soreness). Nothing will prevent soreness other than avoiding injury, which is what we all attempt to do with good riding, good training, and good horsemanship, while asking our horses do work for us in our sport discipline of choice.
Iodine blistering can be helpful with splints, and sore bucked shins. Some feel that the soreness caused by blistering simply forces the humans involved to give the horse the time off to heal, a theory that may hold some water. But perhaps with these fairly superficial (close to the skin) issues, it does bring blood to the area, and thus drives healing. Some people think it’s worth a try, anyway. It’s not a pain free option for the horse though, it’s not comfortable for the horse, it is a “burn” to the skin. Blistering isn’t going to help tendons (IMO- others may have different opinions) or ligaments or joints- they are too deep in the leg structure IMO. Yes, I’ve used iodine blisters on horses at times, for splints and bucked shins in decades past. The issues healed. They would have healed anyway without the blister, I know that, but perhaps better and quicker with the use of the blister. Perhaps not. It’s an “old school” equine treatment, cheap and easy, and sometimes may seem to show some advantages, if used judiciously.