SEO is simply the method of telling the search engines what you are about and what terms you want to show up for, then going out and earning those positions.
Why you need it is simple, Google is the biggest economic engine the world has ever seen. People make buying decisions based on Google searches every day and the percentage of those people who do grows constantly. If you are not on the first pages of the search terms relevant to your business, you are missing out on all of the business that comes from those searches. You are cheating yourself out of business growth by not taking action.