It saves time during development to boot the kernel and use a networked rootfs from the developer’s machine. It also allows for editing on the host files used live on the target
The device can be statically configured in the boot loader to know it’s IP address and what files to download and how to boot them. OR you can configure a DHCP server to tell the device those steps. The latter is preferred as it moves more of the configuration to the developer’s machine and requires less interaction with U-Boot on the device over the console.