Heavy images occupy more disk space of your web server and retrieving them from the server to display on a browser requires more bandwidth. This might not be an issue for the sites hosted on a server with large disk space and bandwidth capabilities but it does add up to hosting expenses.
By optimizing the images one can save both the disk space on the server and the bandwidth involved in displaying those images. It also improves the speed at which images are loaded on the web page even with the slow internet connections such as 2G network on mobile devices.
Lighter websites perform well as compare to heavy websites as they take less time to load all the assets and the desired functions load properly to serve a specific feature on that web page. Images which are optimized for web follow the best practices suited for all kinds of browsers and multiple screen sizes which enhance the performance of your website.
When the website loads fast and functions properly; its overall user-experience is elevated for the visitors browsing that website. Visitors enjoy, retain and most likely to revisit the website which loads faster and get them to their desired information quicker.
Not only visitors but also the search engine like Google loves fast loading websites and in one of their official blog post, they even stated that the page speed would also be a ranking factor in their new ranking algorithm.
When we optimize images for the performance we are also working on improving its SERP ranking. Google gives preference to those websites which load quicker and penalize the slow loading sites. This way the search engine makes sure that the visitors are presented with the sites which are optimized for speed to avoid bad user-experience.