A preloader, as its commonly called is necessary on larger sized movies on websites to play smoothly. It doesn't actually load your movie, the movie will load automatically no matter what, but it gives the user something to look at while waiting, and basically "pauses" the movie until it has loaded. Loading time will vary for everyone based on their internet connection speed, some may see a movie play instantly that others may have to wait a minute for. A preloader insures everyone sees the same thing.
If you don't preload, your movie will begin to play right away, but it will stop if the movie plays faster than you can download it, and will start-stop-start-stop as it loads, which makes all your hard work look pretty bad.