Answer:
It dehumanises them (as it has been used to dehumanise other groups - early Christians and witches for example), i.e. it renders them other than human - monsters capable of performing heinous acts only monsters perform. At the same time it invokes a retaliatory response - these "people" are doing this to members of "our group". The only way to stop them is to kill them first. See the new book by Darren O'Brien, The Pinnacle of Hatred the Blood Libel and the Jews (Magnes Press, 2011).