Why does MMSP need the prescan utility to be run?

First of all, I would like to notice that Prescan is Microsoft tool. It's required to run the tool before upgrading SharePoint 2003 environment.

There are posts explaining what prescan utility actually does: Don't be afraid of Prescan  and Your Friend Prescan.exe - How to Get it & What it Does

Among the other things prescan fills tp_fields column in the lists table to persist the list schema. It parses and saves List definitions with the associated Lists. SharePoint Portal Server 2003 Service Pack 2 already incorporates this feature whenever a list is modified; however, this process should be completed for all Lists, so prescan calls the SharePoint Portal Server 2003 Service Pack 2 method to persist that data.

The tp_field column contains list schema. So, if the prescan hasn’t been run, the column is left empty and MMSP cannot read the list schema.

In this case you see the following error message in issue report: 'Need to use 'prescan' tool!