It's filter dirt and water from entering your tools.
Usually have the bowl is pointing down so you can use the drain valve on the bottom to remove any water.
Another question: The folks that gave us this unit said that it should be drained of ALL air after each use-- I assume they meant at the end of the day but while I'm no authority on air compressors, I've never heard that was a best practice. I usually disconnect the power but don't deflate the air tank. Have I been doing it wrong all this time?