Quick peaks in the signal being recorded will cause digital clipping. Thus, the signal must be recorded at a level low enough to keep the peaks from clipping. Limiting reduces the peaks and allows the overal signal level to be increased. Keep in mind to not use excessive limiting which would squash the the entire signal along with the quick peaks.
Compression performs a similar function. While excessive compression can ruin the dynamics of the signal, compression allows the signal to be raised without clipping.
Kinda like the mentioned "automatic fader."