In most cases, you don't need Hierarchy function to build hierarchy. For example, Year-Month-Date. But there could be reasons for using it. Imaging a table that has EmployeeID and ManagerID (for each Employee except the top manager), and the number of levels is not fixed. In this case the Hierarchy function can help.
It is a good example. The first part you show is a data source, and the second part is a result. You can build this result from the data source with or without hierarchy function. What is better in every particular case, it depends or the specifics. For example, in you case, you can do this without hierarchy if the number of levels is always four or less.