Why is it important for a Web designer to understand how the Web works?

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Several reasons:

A designer needs to understand the web from an accessibility standpoint. The designer needs to know what needs to be implemented and design accordingly to enable various accessibility features for things such as screen readers and text to speech software. A designer wouldn't want to design an entire site in Flash for a website whose audience is the blind folks, because Flash is not that readily accessible by various software. Granted, there are ways to make Flash accessible with smaller Flash components embedded into an already existing website, but it's not really possible to do so when the entire site is in a Flash file.

A designer also needs to understand how the web works in regards for advertising, where appropriate, so that they will understand where it is appropriate and where it is best to put one. Also it will help with determining how to design space for ads when you know how it will work on the web through rotation, sizing, popups, or other various methods for ads.

Also, when a designer understands much more past the face value of a website (the design), it can open up a whole new set of creative ideas to implement into the website. A designer would have base knowledge of what is possible in terms of design vs. programming.
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