Observing someone else being touched seems to activate one's own somatosensory cortex (e.g., this report). It is has been claimed that this effect contributes to action understanding via embodied simulation. Some view this as an example of the "mirror mechanism" by which we understand others by mirroring their experience in our own bodies (or something like that).
First note that this touch-based "mirror mechanism" is quite different from so-called motor mirroring. The motor claim is non-trivial: perceptual understanding is not achieved by perceptual systems alone, but must (or can benefit from) involvement of the motor system.
What about perceptual mirroring? At the most abstract level, the claim is this: perceptual understanding is based on perceptual processes. Not so insightful is it? Perhaps it's even vacuous. But maybe this is too harsh an analysis. One could presumably understand the concept of someone being touched on the arm without involving an actual somatosensory representation. So maybe it is non-trivial, insightful even, that we do activate our touch cortex when observing touch. In fact, for the sake of argument, let's grant that the empirical observation is true and that it does contribute to our understanding.
What might it add to understanding? Or put differently, how much does that somatosensory "simulation" add to our understanding of an observed touch? Consider the following narrative scenarios.
Scenario #1: After he expressed his affection during the romantic dinner, the man reached out and touched the girl gently on the arm.
Scenario #2: After subduing his victim during the home invasion, the man reached out and touched the girl gently on the arm.
How much our understanding of the meaning of that touch action is encoded in the somatosensory experience? Almost none of it. The "meaning" of the action is determined for the most part by the context as it interacts with the observed action. The touch wouldn't even have to actually happen, or it could occur on a different body part (all very different experiences from a somato standpoint!), and it wouldn't alter our understanding of the event. Yes, it's true that simulating the actual touch might add something, i.e., having a sense of what the actual gentle touch felt like on the arm, but what drives real understanding is the interpretation of that touch in its context, not the somatopically specific touch sensation itself.
Conceptualized in these terms, to say that somatosensory simulation contributes to understanding of others' touch experiences is like saying that "acoustic simulation" of the voiceless labiodental fricative in the experience of hearing "fuck you" contributes to the understanding of that phrase. Yes, I suppose the /f/ plays a role, but how it combines with "uck you" and more importantly who said it to whom and under what circumstances is where the meat of the understanding will be found.
It's interesting and worthwhile to understand all the cognitive and neural bits and pieces that contribute to understanding. Lowish-level embodied "simulation," whether motor or sensory, may have a role to play. But it is important to understand these effects in the broader context. Don't for a second think that we've cracked the cognitive code for understanding just because M1 or S1 activates when we see someone do something.