Yeah, it's primarily used for the additional arousal calculations. Generally you can think of it like "you are into *insert_fetish_here* happening", regardless of who is on the receiving end.
A bunch of fetishes are randomly assigned to the NPCs when generating the population, and some combinations of family constellations and fetishes will result in changes to initial stats of those NPCs.
Fetishes are kind of an afterthought. They are mostly there because they were there in the initial version of the game when I took over. And while it's theoretically possible to tie certain event paths to the presence of specific fetishes, nobody is doing so. Especially since it's preferable to let the player decide things throughout the game as they are happening, rather than in some checkbox at the beginning of the game.