What is the FTP layer for?
This allows file operations (such installing extensions or updating the main configuration) without having to make all the folders and files writeable. This makes the site admin's life a lot easier and increases security of the site
You can check the write status of relevent folders by going to ''Help->System Info" and then in the sub-menu to "Directory Permissions". With FTP even if all directories are red, Joomla! will operate smoothly.
NOTE: the FTP layer is not required on a Windows host.