Ummm, no. That's not the reason! You're thinking of bouncing flash off the ceiling, and bouncing flash when it's on a flash bracket will still create the same unwanted shadows sometimes (raccoon eyes).
The reasons you move the flash away from the lens are:
1) to avoid red eye, and
2) to intentionally create some shadows which "model" the face. By moving the light source off camera, or as far away from the camera as you can with a flash bracket, you create shadows which then provide a 3D effect - they show the face as it really is, not flat and featureless like a straight-on flash would.
You can also model the face by bouncing flash off a white wall instead off the ceiling. This can be done even when the flash is in the hotshoe, and it creates the same sort of pleasing, flattering shadows that you want when shooting portraits.
