The importance of the ritual can be understood by the fact that Lord Shiva is known as Mahakala or the great destroyer. The sacred ash is the reminder of the fact that only the purest one, i.e, Lord Shiva, remains when everything in the world subsides.
The most famous Bhasma Aarti is performed in the world famous Mahakaleshwar Temple in Ujjain. This is one of the Jyotirlinga temples dedicated to Shiva. At the temple the aarti is performed early morning between 3:45 AM and 4:30 AM.
Further, in Ujjain, Mahakala Linga is situated facing south i.e. worshipped as Dakshinamurti. This form of Shiva occupies a primordial position in tantric mode of worship which has been prevalent in Ujjain since the medieval ages. And this ritual itself is the reminder of the tantric mode of worship practiced therein. The earliest reference to such a performance can be found in the Mahakala Samhita.
After abhisheka, the sacred lingam in temples performing the Bhasma Aarti is beseamered with sacred ash abundantly amidst chanting the mantras of Lord Shiva.