A Blog is short for 'Web Log', which means an online journal.
You need one if you want to communicate with your readers other than through stories. For example, if you want to tell them why you're not posting anymore, or when you will be posting again, or even what you had for lunch, etc... Basically, use your imagination.
The blogging features on Storiesonline are basic ones. There is no archiving, no blog comments (where readers can post comments on your blog entries). If you need an elaborate blog with more features like feedback and stuff, you should get one at one of the dedicated blogging sites like Blogger.com (free, operated by Google) others offer more services and may or may not be free (you can find many services by googling for 'blogging service'). If you do get an external blog, you can link to it through the database on the site. (read the next question for details on that.)