1: It insures there is no remaining lye after saponification .
2: it makes a super fatted bar of soap. Which in turn makes it more moisturizing.
Many things are unsafe when concentrated. Lye is one one of them. Traditionally Lye is made by letting water seep through hardwood ashes. The ashes are not unsafe. But the concentration of it is. It can chemically burn. And can cause nerve damage.
When you properly mix the oils and lye you cause a reaction called Saponification. Which is the process of making soap.When the mixture of lye and oils starts to thicken the saponification process has begun. After 3 days it is completed. The soap still needs to sit for a few weeks to get good and dry. Here is a link with more information.
Other names for Lye are Sodium Hydroxide and Potassium Hydroxide.