Rendering the timeline makes it play back more smoothly, possibly with better visual quality - or it should - it rather depends on what type of video you are editing. The simple way to determine whether it makes a difference is to put one clip of the type you normally use on the timeline, play it, then render the timeline, play that, and see which looks best (and which seems to stress your PC least, if you can tell).
Some complex effects and transitions will play back much better if rendered, even if you don't render the whole timeline.
Basically - see what works best for you after you've done a bit of testing.
Rendering is exactly as Ozpeter says - a way to improve playback. Also, remember that the playback is but an emulation. The actual Exported material will be better than what you see in the Program Monitor, so long as you have chosen the proper high-quality Preset for Export/Share.
As Ozpeter mentions, you can choose to Render smaller sections of the Timeline. This is done via the WAB (Work Area Bar), which can be set to just the area that you wish to Render. Here's a look at the WAB:
On some Timelines, I'll never Render. On others, usually with intricate Effects, I might Render 20x, just to carefully check how those Effects (or Transitions) are going to perform. To the best of my knowledge, PrE does not use Render files for anything, except playback. I mention this, because PrPro can use those Render files to speed up Export of certian formats, such as Export to DV-AVI Type II. It seemed to me that PrE did this, as well, since a Rendered Timeline did seem to Export/Share more quickly. However, others with more knowledge of PrE under the hood, tell me that it does not use them at all - so much for non-scientific observations.