It sets the Z-height over the work surface. Even better, when used with Marlin firmware it will probe the bed heights at the corners, build a new “virtual work plane” to use as the work surface and then automatically compensate for any unlevelness of the bed by dynamically adjusting the Z-axis as it traverses the bed.
A level bed is key factor in 3d printing. Sometimes jostling the bed (often when removing a finished print) will knock your bed out of whack. So induction probes have become popular additions, but they are not always necessary.
My printer is built on a sheet of plywood so I can move it. The actual bed is aluminum. Movement and flex of the underlying plywood can cause the bed to shift ever so slightly as it is moved around the shop, so I added this to save me a lot of trouble maintaining a level printing surface in reference to the extruder.
Here is good video about setting it up.