You basically reserve time for them. If they don't pay the retainer, they won't have any guarantee that you'll have time for them when they need you.

> When should I have a monthly retainer?

It provides you with a certain amount of income safety, allows you to schedule your time better ahead of time and also prevents you from trying to make time for too many clients at once. (Imagine if multiple clients suddenly have an emergency and ask for your help.)