The main purpose of an aluminium sheet which is a great conductor, is:
$1)$ It prevents heat losses through the process of convection. The hot air is not circulated due to the presence of aluminium sheet.
$2)$ The layer of aluminium which surrounds the food also encloses a layer of air , which provides excellent insulation to the food as air is a very good insulator.
$3)$ Aluminium being a shiny surface reflects back most of the radiation from the food back and further prevents any heat loss.
$4)$ The losses are further prevented by minimising any heat loss by water vapour. As water when evaporates removes a lot of heat. The layer of aluminium keeps the saturated air inside and prevents/reduces evaporation
Note: I am posting a self answer, because I read in the community instructions that it is encouraged here to give an answer. Also many of the good points were summarised in the comments, so I wanted to state them in the form of an answer so that it becomes easier for anyone in the future having the same question to get an answer.