The Psychologist will allow you to see the needs of each prisoner while hovering over them, as well as see the prison's needs via the reports menu.
The Psychologist needs an Office and can conduct behavioral lessons to your most angry prisoners.
Reform Program Edit
A psychologist is used for two different Reform Programs: Behavioral Therapy and Alcoholics Group Therapy. You can hire multiple psychologists in order to schedule extra sessions of these programs. They will each need their own office.
A psychologist is good for your prison so you can know the needs of your prisoners.