That is right, indent the primer when the firing pin strikes it. I always wondered why the designers didn’t put a bit of spring to press it back that would be overpowered by the hammer. We used to inspect our guards to see if they had chambered a round (which in those happy and far off times was not permitted unless they needed to use deadly force)
It's just my guess, but I wouldn't be surprised if the lack of a spring decreases "lock time" and permits the M-16 to fire at a higher rate on automatic.
An internet search indicates a rate of fire of about 900 rounds per minute. That is 15 rounds per second or 67 milliseconds per round. If you add a spring which increases the firing time by just 6 milliseconds, that decreases the firing rate by ten percent.
I do recall seeing that one can purchase titanium firing pins for these rifles. An internet search for this brings up discussions of slam fires and early attempts to lighten the firing pins. I even read that a titanium firing pin might wear differently than the standard pin and might develop sharp edges, thereby worsening the problem of slam fires. There's a lot of technology behind firing a cartridge.