From what I understand at least in the Coptic Church, the censing of the faithful is done as a sort of absolution for the faithful, because traditionally, this was the time when the faithful were confessing their sins before the priest. Notice how at the same time the priest is censing the people, we pray the "Hiten" prayers, which we ask for every saint's intercessions and prayers for the Lord to forgive us our sins.
The censing of both the faithful and the icons is also a way of uniting the faithful on earth with the heavenly as one Church. But before that, there is a confession of sins, and then a censing theoretically speaking. He prays before all this censing the Prayer of the Absolution, "May we be all absolved..."