Starring a subreddit takes it out of alphabetical order and places it at the top of the list of subreddits you subscribe to. The starred subreddits appear at the top of the list, with the starred subreddits sorted alphabetically, followed by the rest of your subreddits.
You can also star a subreddit you aren't subscribed to in order to add it to your subreddit list while remaining unsubscribed. Select the "Manage" menu item then tap the magnifying glass to search for a subreddit. Once you've found what you are looking for, tap the star item to add it to your list without subscribing (if you wish to subscribe, you can do so with the checkbox on the left).