It's to make death a real consequence in the game. This totally affects the way the game is played in the same way that having an infinite energy/life poke/cheat changes the way a game is played vs having three lives and no continues to play with. My son and I would watch
Penga Pangaea on Twitch play no-skip
Super Mario Maker 2 endless expert levels, he is pretty amazing at playing the game so it was often that he would build up to max 99 lives, but then he'd come across some major intricate levels in a row and lose quite a few lives, once down to 20 you can see the pressure start to mount. He never got to 2,000 levels but got to something like 1930 or something before the run ended, after that he decided that he would allow skips for certain criteria (ie; this level would end the run), however, for me once he did that I lost interest in following his videos, knowing that his run could just extend indefinitely because he could skip a level changed everything about what he was doing to the point where the series lost its purpose to me. However, I didn't mind him skipping the super expert levels because they're so hard I think even with skips he never got past something like six in a run. But to bring it back to Elite, it creates a reason where you would have to make a choice about certain actions that might end your character for good.