Because in modern-day cloud systems there is a lot of service-to-service communication, L7 becomes really important (i.e., you're building a distributed system). Istio (and other meshes) try to abstract away the nuances of distributed computing away from developers, by magically adding timeouts, retries, circuit breakers, observability, etc.

In practice, Istio is pretty complex and not for the faint of heart. You can think of Istio and its cousins (Linkerd, Consul Connect, etc) as the spiritual successors of the original Netflix OSS stack and Finagle.