The process you are referring to is seal coating (chip seal) which most road agencies in Michigan use as a relatively low cost method of preserving existing pavements. The tar is actually an emulsion of water and liquid asphalt, which penetrates and seals small cracks in the existing pavement. Sealing these cracks on a regular basis prevents water from seeping into and softening the base of the road and over time causing potholes to form.
The slag stone that we use for cover material sticks to the emulsion and, after rolling and sweeping, provides a slightly roughened, skid-resistant surface to improve safety. Although seal coating can preserve and extend the life of the pavement, it is only a surface treatment and does not fill any existing bumps, holes, or irregularities and thus does not improve the ride quality. For this reason, it is important to apply seal coat to a road before this deterioration occurs which leads us to seal coat roads that are in generally good condition rather than waiting for them to deteriorate to the point that extensive patching is necessary.