Applications use various libraries and frameworks aready stored on your computer in seperate places. Prebinding saves time later by binding these files together beforehand instead of at runtime.
It is nessicary on 10.2, but it's done in the background ones a week automatically I beilive. It only needs to be done to an Application once after you install it, and if you install it with Apple's own installer, it does it. If you use something like VISE it could be up to a week before it gets prebound though.