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As a diuretic:

We know this seed as a diuretic - it helps increase urine output.
As a detox tool:

These seeds has mucilage（粘液质）around them, which will expand in volume when they come in contact with water. They are often used to sweep the intestinal linings, hence aiding detox. which is also why you are told to consume them on an empty digestive tract to see the full effects of cleansing. This form of bulking also helps massage the interior of the gastrointestinal tract, hence aid in digestion and transportation of food.

To stem diarrhea:

Usage of psyllium seed also demonstrates an idea in chinese medicine that inducing diuresis can stem diarrhea.  We say “利小便以实大便”, which means that diuresis can ‘harden’ the feces. This idea actually originates from line 159 of 《伤寒论》 where the author writes:

复不止者,当利其小便

The image that we get in this idea is that instead of water coming out of the gastrointestinal tract, it comes out of the urinary tract, hence reducing diarrhea. My take on this: it’s not so much transfering the water from one channel of excretion to another. Rather, the seeds, on top of inducing diuresis, also absorb alot of water from the gastrointestinal tract. It sucks not just the dirty stuff from your intestines, but also water.

Summary:

Useful for both inducing peristalsis (when the food moving very slowly) as well as reducing fluid content in the intestines, it is a dual-action herb.