Basically, gasses blow by the piston rings as part of the engines normal operation, and the breather system routes these back into the inlet manifold to be burnt off. As the gas travels thru the crankcase it can pickup oil vapour and carry this into the inlet as well. The oil reduces the intake charges octane level slightly, so can reduce power, as well as clarting up the inlet etc.
The engine has a seperator built in, whose job is to try and "catch" that oil vapour and let it return to the sump. Its not that great though, so people add an external one in the form of a catch can. This can then be vented back to the inlet, or vented to atmosphere depending on your preferences.
I find Atmo venting can make the car stink of oil vapour when stopped at lights or in traffic.