There are several reasons for streaming.
When you use windows file sharing it pulls the entire file to your local computer before it starts to use the file. Streaming starts to send the file and if there is sufficient bandwidth (which there normally is) it starts playing immediately.
The other thing you mention is trans-coding where a file is converted from one format to another. You're right that this is linked to streaming, but it is also as important for downloading files into any player that doesn't play the format.
MC can do both, which is great for storing your files in a low-loss or lossless format like ogg-vorbis or FLAC and streaming them to a soundbridge or transferring them to an MP3 player.
HTH
Rich