Bundled Cables are used when you want to combine Insulated Wires of different colors, and have them come back out again at a later point ! It can connect all 16 colors of Insulated Wire without them interfering with one another on a single block.
There are, depending on type of Insulated Cable you used to make the wire, 16 different base colours of bundled cables. They all, like Insulated Wires, only connect to the cables of the same colours. Even more useful for compact mechanisms ! Power supplied to the cable from Insulated Wire (uninsulated wire doesn't connect to the cable) will only power other wires of the same colour attached to the cable.