It serves two purposes on a PeerTube instance: it ensures all videos can be played optimally in the web interface, and it generates different resolutions for the same video.
Organize videos in public or private <a target="_blank" rel="noopener noreferrer" href="https://docs.joinpeertube.org/use-library?id=video-history">playlists</a>
It's the reason why we encourage developers to use the <a target="_blank" rel="noopener noreferrer" href="https://docs.joinpeertube.org/contribute-plugins">PeerTube plugin API</a> to create their own monetization system.
From that moment on, Dominique is responsible, because they are warned that they're hosting an illegal video. It is therefore up to them to act if they don't want to be held accountable before the law.