The recovery is used for a lot of things. One of the most important is to make a backup of your current ROM using the backup option in the backup and restore section (this is called a nandroid backup). When you mess something up (we all do, even the most seasoned flash-a-holics) you have a complete backup to restore to get you out of just about anything you can mess up.
It would be a good Idea to put the contents of the sd card onto a PC after you do a backup of your current ROM in case you wipe your sd card or the card goes bad. The backup is stored in the "clockworkmod" folder on the sd card.
I actually wiped my sd card by mistake, but I had a folder on my PC with the contents of the sd card in it.
Something else that is a good Idea is to have the xionia recovery in it's zipped form on the root of the sd card. This will help get you out of a recovery loop should you cause this to happen. It can be found by looking in the "flash_image and recovery" section. Select the last item. Once to the page, look at the bottom of that post.
