Compiling is a term that is used when you are making something out of many things, in OT's case, you make a server application out of dozens of source files(aka sources)
Its main usage is having a server where you can change the sources of the server instead of using the default one already provided by Talaturen
Its advantages is that with source access you can change anything you want in the server, with even more freedom than with Lua, such as creating new functions, change for example damage/exp formulas, change how monsters behave, etc..
You don't need to compile, you only do it if you want to do something that you can't do in Lua