BIOS is actually an acronym standing for Basic Input/Output System. It is a term used to refer to the set of computer instructions that are built into the system which initialises the hardware when it's switched on.
At a very basic level, emulators 'pretend' to be the system that they are emulating. In order to do this, they must still "initialise" the fake hardware so that the Operating System/Program (in this case, the game you're playing) - can still access stuff like the buttons, speakers and the screen in order to make things happen.
The emulator acts as a go-between: it accepts the game's commands to the original hardware, translates it into something your current hardware can interpret, and back again. For example: play a sound or music, draw a character to screen, or accept your input from pressing buttons.
Why enable it?
Whilst the emulator you're using may come with a default BIOS file and this may work for the majority of the games that you are playing, you might find that a game may not work with the default. BIOSs, like the hardware they were pulled from, can be region-specific.
Say you get a hold of a Japanese-exclusive copy of a game.
- The game could be glitchy when running it on a US or EU BIOS
- The hardware could've been modified between regions
- The BIOS itself could be outdated (or even updated!), causing the game to glitch because it was built to support a specific version.
- The game could refuse to run altogether as a region-locking/security feature.
Does the BIOS increase the performance of the game?
Ehhhhhhhh... kinda. It can improve performance, but any improvement will only be because of the specific version of the game/BIOS you're running.
As a real-world example: The Sonic the Hedgehog games run slower in PAL regions (AU, EU), and faster in NTSC regions (US). If you have an EU copy of the game with an EU BIOS, you will notice that it's slower compared to the US copies of the same game). But again, that's game-specific.
Is it recommended to use a BIOS?
If your games are running fine without loading in a custom BIOS, then there's no need to use a custom BIOS. Only override the default if you find you're having issues.