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That is what a Market Maker is.

Exactly. GDAX and other exchanges charge less or no fees to the market makers to increase liquidity in the market. (Basically lessen the spread and increase volume on the order book).

From the exhanges POV this is useful because more orders = more money for then.

From the market traders POV (the taker) this is useful because a lower spread and more volume means there is less chance of buying something they can't later sell.

For the market maker, they make their money on volatility (aka the movement if the price). If they think the price is going up, they will offer to buy at a price higher than the current highest buy offer. This reduces the spread and increases the odds of someone taking their offer. They will then later sell those coins, and make a small profit on the movement.

If they think the price is going down, they will place a sell order cheaper than the lowest sell, and then buy back later, making small profit whole keeping the same amount of coin / stock / whatever.

Basically a "market-making" trader is less in it for long-term, and more interested in making money on the movement.

Aside: You may have also heard of "short selling". This is when a market maker is betting the price is going to go down, but doesn't have anything to sell. In a short sale, they will borrow the stock/coin from someone else (such as the exhange or their broker), and sell it, promising to buy it back later to repay the loan of said stock / coin. Easy way to bet on perfornance of an asset you don't owb, but dangerous since if you are wrong and price goes up, the person who loaned it to you will want you to repay it back sooner rather than later, costing you money!

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