The sear safety was designed to assist in the prevention of accidental discharge by a police officer who had stupidly disassembled his Luger without clearing the chamber. The upper half of a Luger is designed in such a way that it can be fired without being attached to the lower frame by depressing the sear bar when the toggle is cocked and a round is in the chamber (DO NOT TRY THIS AT HOME KIDS!)
The sear is only free to move when the pistol is assembled and the flat steel indicated by the red arrow is resting upon the top of the sideplate.
When the upper half of the Luger is removed from the grip frame (or for that matter when the sideplate is removed) the spring tension of the sear safety inserts a pin into the sear and prevents it's movement.
I hope this explanation and photos are helpful.
regards,
John Sabato
http://boards.rennlist.com/upload/SearSafety.jpg