A neutral density (or ND) filter serves to reduce the amount of light hitting the film. The easiest way to think about this is that it is like a pair of sun-glasses for your camera. Importantly, an ND filter reduces all wavelengths (or colours) equally and therefore there is no change in color or resulting color-cast in your final images.
In instant photography, ND filters are used primarily to make film cross-compatible across cameras, specifically, to use 600-type film in your SX-70. Reasons you may wish to do this are that there are many film varieties, colours, duo-chrome editions and otherwise limited editions which are only available in 600-type format. As opposed to SX-70 type film where there is only black & white or color with the standard white frame.
Adapting the film speed via ND filter can be done in two ways, the first is to install the Impossible ND filter on top of the film pack, the other is to use an ND filter in front of the lens of the SX-70.
The Impossible ND Film Pack Filter (available here) works by limiting the light hitting the film at the film cartridge level, inside the camera. For full installation instructions, see our FAQ article; How to insert an ND film pack filter.
The other option is to limit the light at the point where the lens receives light. Note that this is perhaps the less desirable option as it will make your view, what when you look through the lens, darker as well. This means the scene you are observing will appear darker and also that it may be more difficult to focus the lens as well. An ND filter is included in the Lens Set for SX-70 (available here).