Postlab saves each version of a Document, but it doesn't simply save an entire version each time; it will only save the parts that have changed. When you go back to a previous version in Postlab, the Document is reconstructed based on what parts changed when. For that, a lot of reference points are saved, and over time many of them become moot. Housekeeping will check each of those references and decide whether it's still needed and if not, it's removed. This makes Productions open faster and feel more responsive.
By the way, housekeeping is done automatically on the server so downloading a Production for the first time will always neat and tidy. It's just all the local changes that also could use some housekeeping once in a while. Like in real life, housekeeping can be time-consuming: the more versions you have of a Document, the more references and the longer housekeeping takes. So, best run it after finishing a job, when you feel the production was a big sluggish. If you've worked for weeks in a production, deleting it from your Postlab folder and redownloading might be the faster solution.