This has been brought up before so I'll give my 2 cents worth. In the other thread it was pointed out that its main function is for engine fires. As your engine burns, it will break apart and fall down and try to smother the fire.
Since it's insulation I'm sure it help with heat and sound. But let me say that I had a Celica GT4 years ago and I removed the insulation from the hood. On those engines, the turbo is right on top on the front of the engine, and the intercooler was on top of the engine (so you can guess the amount of heat generated).
No damage was done to the paint. That car was an '88 and we know Toyota uses different paint over the years. But still, if the paint could hold up to that heat, I'm sure we're fine.