Why are precedents important?

Precedent is important because, in the absence of proper laws, the judges needed to do whatever they could to insure that the rulings of judges remained roughly consistent from place to place. By investing higher courts with the authority to make binding rulings, the legal system as a whole was granted a more or less consistent system of "law" that was fairly resistant to change.

The problems with the system are several. The common law system emerged from medieval England, which had a weak legislature, kings who were often not terribly interested in ruling, and a largely illiterate populace. As a result, judges were forced into making up the rules as they went along, since there were no comprehensive legal codes to guide them. When a judge made a decision, a private freelance reporter would note the decision (often incorrectly) and distribute it to other judges and attorneys for a fee, so they could try to, more or less, maintain consistent rulings across the kingdom.

At its root the common law system rests on a fallacy: appeal to authority. The older decision will generally be upheld even if it is wrong, stupid, or otherwise bad. It takes massive defects in the precedential ruling before the courts will overturn it. "Common law" also makes the law basically unknown and unknowable to the common people, who have no way to look up case rulings, no way to interpret them, and no way to guarantee that they are still valid.