Searing off the beef caramelizes some of its natural sugars. This creates deeper, richer, more beefy flavor than if you had just thrown the raw meat into the pot. It's also a good idea to brown the stew meat in a skillet. By using a skillet, which is shallower than a stew pot or dutch oven, you allow plenty of room for moisture evaporation, so you get a good sear quickly.