I don't think you can apply for residency with only a 6 month visa, as you only need to register if you're in the country for more than 182 days anyway (6 months). You register with your local police station if they stay in India will be above this figure, noramlly a straight forward proceedure, you will be given a residency permit which is required to be with you when you leave the country - although they've only looked at mine once on Exit..
In theory the pass allows you to get things at local rates - eg some airlines (Jet Airways etc have lower fares for locals), and you should be able to get in to Tourists places for local prices also (but not tried)...
It doesn't entitle you to any visa, it's just a requirement if you have an extended visa. The purpose is that the authorities can keep a track on you while you're in the country. Also prevent you from leaving if required.
Having one enables you to buy property, have vehicals in your own name, start a company etc (on right visa) etc.. (OR AT LEAST SHOULD - if you can get through the red tape and back handers)