One reason is to save space so you can get more days of recording time on the card.
The recording on the microSD card will be either SD ( SD or 360p app settting) or HD ( HD app setting).
Perceived quality of the viewed video stream definitely depends on the WiFi connection, and I have definitely seen more stuttering in HD recordings than in SD recordings on my Wyze cams.
I have started formatting my SD cards exFAT instead of the recommended FAT and the recordings ~seem to me~ to be a bit smoother. Long term success of this approach has yet to be proven though.
I have also started using the Pro Endurance cards designed for continuous video recording.
https://smile.amazon.com/Samsung-Endurance-64GB-Micro-Adapter/dp/B07B9KTLJZ