It is an important step in starting horses because it will teach the horse the rein aids as well as lateral movement before you start riding them. It also benifit's any horse to refine their aids and responsiveness/attentiveness.
Gets the horse used to bit aids before getting on
First things first, it's important that you don't rush straight into long-reining. You must first be able to lunge well from one rein, and then from two. Your horse needs to be happy with a second line around his quarters, and you must be competent doing this and holding the lines.
The benefits of long reining are: strengthen your horse's body, teaches the horse to be confident, striding out in front learning the big wide world is an exciting place and not something to be feared.
Before the backing stage the horse, without the weight of the rider, can learn how to turn left and right, stopping, and walking forwards on command. The young horse gets used to the feel of the bit (contact). Manoeuvring in and out of bollards. Stepping across perceived scary object, for example poles and plastic sheets.
Also is an excellent way of re-schooling a horse, building confidence and trust, working a horse who is unable to be ridden under saddle, for example a sore back.
Lunging with two reins gives better control of the hind quarters an you can even teach lateral work, the possibilities are endless.