Sit on tops ride on top of the water. Because most of the boat is above the water, a scupper hole can drain the area you sit in (which is a little recessed) allowing for a slightly dryer ride. The water is it draining is water from splashes and drips. If it wasn;t draining, it would slowly fill the area you sit in.
A scupper pug is meant to seal the holes to prevent some water from coming up the holes. IMHO, this doesn’t really work. I’ve never bothered.
Swell Kayaks, a relatively new brand from Tim Nemier (the inventor of the sit on top) uses one way valves for scupper plugs, in theory allowing the best of both worlds. When you are moving, the valves are supposed to open and drain, but are sealed when you are not moving.