Component video switching means you can have multiple (up to three?) component video sources coming in to the MC-8, and switch between which of those sources is routed to the component output of the MC-8 (and presumably to the input of the display).
The intent is convenience - when you switch sources on the MC-8, you will be switching both the audio you hear and the video you see in one step.
An alternative is to connect each video source directly to a different component input on the display. You can then use the MC-8 to switch the audio and use the display to switch the video. Makes it a two step rather than one step process. That provides a more direct path for the video, although I have never read about any degradation of component video signals through the MC-8.
None of this matters if you only have one video source.