Steeping helps mend & develop the flavours and slightly oxidizes the liquid. The name comes from making tea. If you don't let your Tea leaves steep long enough it will lack some flavour. It's similar to aging wine or cheese.
I steep by shaking the bottle well and taking the cap and dropper off over night so it can Air and then shaking again in the morning. I do this where there is no other smells like perfume or cooking foods that could get into the e-liquid (why I only do it overnight). The most I have to do this for shipped to me liquid is 2 or 3 nights and the flavour is at it's best.
When I make my own DIY liquid, To help mend, or bring together the fresh mixed flavours, I will fill a shallow bowl with hot water and place the bottle with cap on and standing up into the dish to warm it up. When it's warm I will then shake it and repeat again with heat. After a few times I will dry the bottle and carefully take the cap off and dry it and the bottle dropper to get rid of any water that could ruin the e-liquid. I then take the dropper off and begin Steeping over night. If you get any tap water in e-liquid it will ruin it and will taste bad, so I dry everything well before taking dropper off.
A lot of flavour used in e-liquid can take 2 weeks or longer to develop after it is mixed. For example, if you use the sweetener Ethyl Maltol and vape right after it is mixed, it won't be sweet. Wait 4 days and it will start to be sweet. Wait a week and it will be even sweeter. After 2 weeks it should be as sweet as it will ever get. This is the Steep time to Develop the sweetener of Ethyl Maltol. Other flavours have their own times and some need none. A caramel flavour I use will taste like Candle wax for 2 or 3 days after I mix with it. After 4 or 5 days it no longer taste like wax and becomes a delicious Caramel. The 2 methods I described above help to shorten the time needed to steep, or speed things up.