Hyperfocal distance graph
1) If we focus too close the distant part of the image will not be in focus
2) If we focus too far away we are "wasting" some dept of field and giving up focus in the foregroud
3) By calculating the exact hyperfocal distance we make the most of the available depth of field.
Here is a great tool for working out distances (just adjust it to match your camera type, lens & f-stop)