What is the use of this diode in the circuit?

This circuit is for a buck converter. If you look into the working of the buck converter, this diode is essential for the purpose of voltage conversion.

What happens is that, during Toff duration, inductor current cannot change instantaneously, hence, a freewheeling path is required when the transistor inside the IC is switched off. That is why this diode is called freewheeling diode.

TI LM2576 Datasheet

It is explained in the/a datasheet of the LM2576:

https://www.onsemi.com/pub/Collateral/LM2576-D.PDF

In short, the circuit you mention is a buck converter, and the diode is called a catch diode.

Below the excerpt:

That's a switch mode regulator, so that is the catch diode that conducts the current from inductor to output during the time when the switch is off. It is not for short circuit protection or turning off the chip.