I was at a wake (or visiting hours) last night and a friend asked 'What is a Wake?' In her native German a wake is something to do with vigil. We googled it and it seems to derive from the Gothic for vigil, to watch"
"to become awake," O.E. wacan "to become awake," also from wacian "to be or remain awake," both from P.Gmc. *waken (cf. O.S. wakon, O.N. vaka, Dan. vaage, O.Fris. waka, Du. waken, O.H.G. wahhen, Ger. wachen "to be awake," Goth. wakan "to watch"), from PIE root *weg- "to be strong, be lively" (cf. Skt. vajah "force, swiftness, race, prize," vajayati "drives on;" L. vegere, vigere "to be live, be active, quicken," vigil "awake, wakeful," vigor "liveliness, activity"). Causative sense "to rouse from sleep" is attested from c.1300. Phrase wake-up call is attested from 1976, originally a call one received from the hotel desk in the morning. http://www.etymonline.com/index.php?term=wake
In terms of what it does funeral-wise, I think it starts to lend reality to loss by having it witnessed by friends and relatives--much like other phases in our lives. And, like when priests now ask if the community will support the newly married couple at the altar, it shows the family they are supported by this community of friends and relatives. When your friends see what you are seeing it makes it real and immediate.
On anothe count, as life hurries on around you at the wake and funeral--people laughing, crying, walking down the street, not affected at all by what you are feeling, it tells you life goes on with or without you and yours. This is a cruel lesson, but much needed as we are stuck in grief. This lesson grabs us by the collar and shakes us out a bit.
And, last night, after the wake at the family's home, I was reminded that the person we were waking would have been having more fun at the party than anyone. He would have had a few and really enjoyed having all the people there.
In different families, traditions and neighborhoods this sad celebration of a person's life and family connections is different. What is yours?