What is the advantage of "Copy files to iTunes folder when adding to library"?

Why does iTunes make a seperate copy of the media? I've ran out of space on my HD. I've followed directions on moving my iTunes Media folder to an attached WD 2TB drive on my iMac. Running Snow Leopard. I've over 500GB of media and I end up with a similar size in my iTunes media folder. I've got room, but it seems like quite a waste of space, since their both on the same ext drive. What is the danger in unchecking the "Copy files to iTunes folder when adding to library" check box in the ADVANCED tab of iTunes Preferences? Every set of instructions I downloaded to move the media folder and have iTunes know where it's at on an external drive all had the same instruction to check the "copy" box. I'm sure there's something logical in that line of thought, I just can't see it. Can anyone out there explain it to me? I've currently have it turned off and I it all seems to be working correctly.

thanks.

Sam