Good question!
The commonwealth is NOT a political union of any sort, and it does not allow exercise of any power over the affairs of the organization's members. As it looks like, the organization is not made to influence any country economically or politically or to practice the strength of one country over the other but it is meant to establish and strengthen a friendly relationship between the member countries to help each others in future.
So, let me explain, in a layman's language (the way I have learned) what Commonwealth and Commonwealth Games are all about.
The Commonwealth is primarily an organization in which countries with diverse economic backgrounds have an opportunity for close and equal interaction. The primary activities of the Commonwealth are designed to create an atmosphere of economic co-operation between member nations, as well as the promotion of democracy, human rights, and good governance in those nations.
As you might have guessed by now, the various sports activities like Aquatics, Athletics, Badminton, Bowls, Boxing, Cycling, EAD Events, Gymnastics, Hockey, Netball, Rugby 7s, Shooting, Squash, Table Tennis and Weightlifting are all meant to bring the countries together to strengthen the relationships. This time (2006) it was Australia next time (2010) it will be India.
The important part to remember here is, just because you are a member country, this does not give you the right to organize the Commonwealth Games in your country. There are criterion that the member country has to meet before it can even "bid" for the commonwealth games to be held on its land.
You got a new term there, BID. Yes you heard that right, a member country actually has to place a bid and win the bid so that the games could be played on its land. India has won the bid last time over Canada. This is a moment of great pride that the events are going to be held in India, they not only won the bid but they are actually very close to meet all the deadlines that were given to prepare for the games and improve the infrastructure according to the international standards.