In Java, the Scanner class is utilized to accept user input, and it's critical for developers to understand the need to close the Scanner object. Failing to do so may lead to memory leaks that can negatively affect program performance, especially when numerous I/O operations are involved. When you call 'sc.close();', you release all the resources associated with the Scanner, making them available for reuse. This practice is a good habit in programming as it enhances the efficiency and reliability of the application.