When I bought my Impala, I asked the salesman specifically about the underhood pad on it. According to him, it is attached to the hood with plastic bolts/pins that are designed to melt at a specific temperature. If the engine catches fire, the bolts/pins melt, allowing the pad (or "blanket" as he called it) to drop down on the engine, smothering the fire. It was put in there primarily to do that.
Now, that is on my Impala. I would have to assume that the Mustang's is similar is design and purpose.