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They wrap the rod to help with potential rattling.
On my first guitar build back in 2008 I built a LMI dread kit. It came with their 2 way truss rod. I did not glue in the rod nor lay any silicone under it in the channel.
When the guitar was finished and played for awhile it developed a rattle in the neck when I'd play a certain frequency. Arg!
So this is a bolt on neck mortise and tenon and I did NOT glue down the fretboard extension so I easily removed the neck and drilled a long hole along side the tenon up into the truss rod slot. Then I injected silicone into the slot. Not sure how much got in there but some did, and it was enough to solve that problem. 12 years later I still play this guitar and it has never again rattled, and yes the rod adjusts just fine.

I've used both silicone and titebond in the channel, even though my rods have a nice firm fit. I used silicone on my first 2 builds and have used titebond ever since. I've had to remove a rod from each of these adhesives without consequences.

I just use a thin line at the bottom of the channel. I just use titebond now, because it's handy in the shop.