Shang Tsung's Flesh Pits have never been truly explained, although one can speculate as what their purpose had been. It is clear, however, that they were designed to create creatures, likely to do Shang Tsung's bidding. Furthermore, they may have been a source of limitless souls for the sorcerer, due to his rapid aging, he requires souls to maintain his youth. Thus, it can be concluded that the pits were a source of both minions for the evil sorcerer and a way of maintaining his youth when he needed to. This privilege may have been extended to Shao Kahn.
The only known characters ever to emerge from the pits to fight in Mortal Kombat were Meat (who was originally a secret skin in Mortal Kombat 4 and was then later transformed into an official character in Mortal Kombat Armageddon), Mileena (confirmed in the second portion of her biography concerning Mortal Kombat (2011) and Skarlet, an enforcer of Shao Kahn created by mixing warrior blood and sorcery.
Another creation was the Flesh Pits Mutant, created by Shang Tsung to guard the souls in the Krypt and is a failed, rejected Flesh Pits experiment.
In an alternate timeline of events, a possible outcome led to Reptile turning against Shao Kahn and slaying him. Afterwards, he forced Shang Tsung to use his Flesh Pits to restore the Raptor race. After many agonizing attempts, he succeeded in creating the broodlings that were loyal to Reptile and eventually they stormed Outworld; slaying every Tarkatan, Shokan and Centaur.
In Mortal Kombat vs DC Universe, Shang Tsung's ending indicates that the sorcerer was both impressed and angered by Captain Marvel defeating him. Using his magic within his flesh pits, where he tortures his victims, he mixed the blood on a torn piece of Captain Marvel's cape with that of a Tarkatan warrior creating a horrific race of Super-Tarkata that appears before him and his concubines. They would forever be loyal to Shang Tsung. These creatures appeared somewhat similar in appearance to Dark Kahn.