HakuSwap is an Automated Market Maker (AMM), and the Exchange is at the keystone of HakuSwap.
HakuSwap lets users trade without the need to go through a Centralized Exchange. Everything you do on HakuSwap is routed directly through your own wallet—no need to trust someone else with your coins!
The HakuSwap exchange can only operate when there's enough liquidity to support trades; if nobody wanted to sell you AVAX for example, then it wouldn't matter how much you wanted to trade for some.
Providing liquidity will get you LP Tokens, which will earn you rewards in the form of trading fees for making sure there's always liquidity for the exchange to use.