Surrounding text with braces, i.e., {text} doesn't result in a error as it is perfectly valid syntax.
The braces define a group, which means that changes will be local to that group. In this case there aren't any settings in the group to keep local, but it is still valid syntax. For instance,
xxx {\bfseries abc} yyy
results in

Note that only the abc is in bold - the yyy is in normal font. The braces keep the \bfseries local to within the { and }.
Besides grouping there are some other uses of curly braces:
1. Text Mode:
In text mode, curly braces can be used to control the spacing after a control word. So
\TeX code {\TeX} code
yields:

where the space following the control word is removed without the use of {}.
2. Math Mode:
In the math mode, adding curly braces controls has additional effects. For instance, braces can affect the spacing around "math atoms". (Upshot: Don't add curly braces unnecessarily when in math mode.)

Code:
\documentclass{article}
\usepackage{amsmath}
\usepackage{xcolor}
\usepackage{showexpl}
\lstset{
language={[LaTeX]TeX},
backgroundcolor=\color{yellow!40},
basicstyle=\small\ttfamily,
}
\begin{document}
xxx {\bfseries abc} yyy \quad \TeX code {\TeX} code
\begin{LTXexample}[pos=r]
\par $a=b$
\par $a{=b}$
\par ${a=}b$
\par $a{=}b$
\end{LTXexample}
\end{document}
\lbraceor\{for the left one and\rbraceor\}for the right one. – Astrinus Dec 20 '14 at 20:53\{and\}? – Dec 20 '14 at 20:53{check this out}. From my understanding{and later on}are invalid tokens. But they aren't, so my question is: what do they do in this case, and where can I read up on it? I'm used to the idea that{is preceded by some kind of macro name. E.g.\begin– Melvin Roest Dec 20 '14 at 20:59xxx {\bfseries abc} yyywill make only theabcto be bold - theyyywill be in normal font. The braces keep the\bfserieslocal to within the{and}. – Peter Grill Dec 20 '14 at 21:05texdoc texbytopic. probably more than you wanted to know, but a good resource for anything about tex itself (not latex). – barbara beeton Dec 20 '14 at 22:02\foolooks for one argument, if it finds{as a following token, the content between{..}will be the argument (and this has nothing to do with groups). If the macro doesn't find a{then it takes the first token (e.g.,\foo abcwill be the same as\foo{a}bc). – Manuel Dec 21 '14 at 04:04