In another link, it's stated that the bomb was designed to serve as a "locating device" if the capsule sank:

Once Liberty Bell 7 is aboard the ship, a two-man crew from the bomb disposal firm UXB will try to find and remove a small ordnance located near the top of the capsule. The bomb, which is about the size of a soda can, was designed to detonate at a certain depth below the sea in case the capsule sank.



NASA put the device in the spacecraft so that recovery teams could pinpoint the location of the sinking ship from the bomb's sound waves. But apparently the bomb never went off.



Frankly, that sounds very odd to me. Why a one-time explosion, that would certainly wreck the capsule, would be a better locating device than a battery-powered pinger is more than I can figure out.