Vaseline doesn't DO anything--it just sits there. But because it just sits there on the surface of the skin it can help prevent frostbite. Vaseline has some ability to insulate. Before wetsuits, long distance swimmers used to coat themselves with lanolin, lard, petroleum jelly or the like before they attempted to swim in cold water to reduce the rate at which they lost body heat. It's debatable how much Vaseline actually helps to retain body heat, though.
What Vaseline does do well is repel water. If your chicken's Vaseline coated comb or wattles come in contact with water it just beads up and runs off rather than freezing to the tissue or evaporating and thereby cooling the tissue. Vaseline also prevents tissue from losing moisture. A body that is properly hydrated is better able to maintain proper temperature. Vaseline will provide a barrier against condensation as well. As water saturated air cools, it loses its capacity for holding water. Water in the air will condense on surfaces--including your birds combs and wattles. If the temps are below freezing, this will cause frostbite. A good coating of Vaseline will prevent that water from coming into contact with your birds' skin. So, if the primary cause of the frostbite is moisture coming into contact with tissue at freezing temperatures then Vaseline will help prevent that. There is a point at which Vaseline becomes useless against frostbite where moisture isn't the issue and the temperatures are just too cold.
Where I applied Bag Balm to them earlier today it makes their combs sticky like petroleum and when he preened his feathers the loose feathers stuck to his comb 
