Battery service recommended - Warning is popped up.

Unfortunately the new "Service Recommended" battery condition does not tell the user whether macOS has detected a hardware issue with the battery or whether the battery Full Charge Capacity has dropped below 80% of the original Design Capacity. You can try running the Apple Diagnostics to see if any hardware issues are detected. If no hardware issues are detected, then you can try running Coconut Battery to see the percentage of the Full Charge Capacity remaining from the Design Capacity.

If the diagnostic does not report any hardware issues, then there is no need to replace the battery unless the battery is not performing to your expectations.

You don't have to, but it is recommended you do that yes. In other words, it would be a good idea, but nobody will force you to do so.