It means that carriers don't have to maintain "sessions" centrally. The SIM can authenticate you to the base station without the base station having to check back to see if you're logged in elsewhere - vital in reducing the latency of cell changes.
(It also stores various bits of technical information for SMS/MMS routing, and was intended to be a platform for "value added" applications.
Authentication in a telco context is a good thing, the fact that the web doesn't have it enabled a large number of applications to flourish, it also made some other things devilishly hard, or even almost impossible.
Only on home network, everybody who knows your IMSI and have low level access to phone network can clone your identity in roaming.
The alternatives are worse in usability AND security.
If you don't want your account to be hacked: yes.