If your stash is made up of very many small UTXOs, you pay higher fees when doing stuff onchain. So people consolidate their UTXOs into larger chunks.

Imagine you had 100 $1 bills or one $100 bill. And for each individual bill you want to send someone, you have to pay a flat fee on the envelope.

If you send 100 envelopes with a single $1 bill each, you're paying fees you can avoid by sending a single envelope with a single $100 bill in it.