The Reef Aquarium Vol I page 251/252 states the following:
"Lugol's solution, also known as "strong iodine" solution, was brought to our attention by John Burleson and Merrill Cohen. They both found that is stimualted growth in Xenia species, and helped prevent common "crashes" of this soft coral."
"Iodine (as iodide) appears to be essential for the long term maintenance of Xenia and certain algae. It is beneficial to other soft corals, especially Anthelia spp. and Clove polyp (Clavularia sp.). Iodine additions are also absolutely critical for long-term success with stony corals."
"Based on observations in our own aquaria, confirmed by our communications with A. Nilsen and D. Stuber, and prior work by Peter Wilkens, it appears that iodide is critical for the development of pigments in corals, corallimorpharia, and anemones, both the golden brown of the zooanthellae and the green and red colours of accessory pigments."
This section of the book goes into more detail about iodide/iodine in reef aquaria. I have also read in the Modern Reef Aquarium Books about the benefits of adding iodine/iodide to the reef aquaria. I hate to sound like I am arguing with Bang Guy, but I tend to agree with Sprung, Delbeek, Nilsen, and Fossa. I believe that Borneman also points out the importance of iodide/iodine for coral health. I have personally noticed a dramatic difference in color and health in my corals after regular dosing of Lugol's solution.
P.S. It can be easily overdosed which can be detrimental to aquaria inhabitants. Use caution not to overdose.