Dilation is about keeping the wound from closing/tightening up, maintaining the width and depth of the faux vagina.
For those that don't want to watch what looks like a horrendous amateur gore porn video, it involves jamming hard plastic dildos into the wound, multiple times a day initially, and reducing the frequency over time.
Trannies that go for reassignment surgery("bottom" surgery) and want a functional(read:fuckable) vagina need to do this afterwards, otherwise they risk losing multiple inches of depth. They have to keep it up for years, after about a year they're down to doing shit only a couple of times a week instead of multiple times a day, but the whole thing is routinely referred to as torturous experience and seems to be a common major point of regret and/or frustration.
Some trannies just see it as the cost of becoming what they feel they are, but for others it's where being a tranny at all falls apart because it's where they pass the one real point of no return in playing with a stupid fantasy about being a girl. If you realise you've made a mistake in trying to live life as a girl, you can stop wearing bras and dresses, if you've been on hormones you can just stop taking them and you can get breast reduction surgery or get your implants removed, but you cannot undo the damage that is done to your genitals when you go for SRS, you cannot get your discarded testicles back, you cannot just give your inverted penis a little tug and have it pop back out like nothing ever happened.