This allows file operations (such installing extensions or updating the main configuration) without having to make all the folders and files writeable. This makes the site admin's life a lot easier and increases security of the site
You can check the write status of relevent folders by going to ''Help->System Info" and then in the sub-menu to "Directory Permissions". With FTP even if all directories are red, Joomla! will operate smoothly.
NOTE: the FTP layer is not required on a Windows host.