I have a 10 year old daughter who is playing kid pitch softball for the first time this year. Last night her team had two base runners called out because of the "look back rule".

I looked it up and read the rule (which I find ridiculous) but I'm still confused about the rule. Why does it exist? What are the limitations of the rule?

It seems to be an umpires discretion type rule, but it also seems like it could be easily manipulated especially at younger ages.

It's a rule in order to simply speed up play, really nothing more than that. It is a rather silly rule, however, it is used to keep a pitcher/runner stare down from dominating action. As far as interpretation, you'll see it called different depending on where you're playing at. Generally the girls understand the rule around 10U/12U or so and you rarely see it called in ages older than that.