I've got a 88 iroc with a bad hood liner. I'm just wondering should I just take it out or replace it? What is it's for?

 

Its just a thermal insulation. I know lots of guys who run without it.

 

No insulator for 3 years now with no problems.

 

It's a thermal insulator/fire mat. If your engine catches on fire the plastic clips are supposed to melt and drop that mat onto your engine in an attempt to extinguish the flames.
Food for thought - 4th gens don't have them. My 07 GXP does not have one. I've been running for 7 years without one on my 3rd gens.

If you feel you need to replace it, i've got one I could sell you.