An audio interface takes over the job of converting analog signals to digital and the other way around. They do this through dedicated hardware, and their own Windows drivers so that the incredible amount of processing required to do this is not placed on the CPU, but rather in the audio interface itself.
The result of this is much less work for your CPU, leaving it free to do other things, like running Sonar and that sort of thing. CPU's that get too loaded up with work cannot keep up with the never-ending workload expected to do the A/D and D/A conversion, and when they cannot keep up, audio crackles and pops and altogether loss of audio while you are playing start to happen. The interface takes all of that work on instead of your CPU.
Audio interfaces typically have line inputs and outputs, headphone jacks, midi input/output ports, a USB connection to the computer, and also microphone inputs. Many have mic pre-amps in them as well as phantom power. One of these would be a great addition.
If budget is a concern, there are as pointed out some pretty reasonable ones out there that do home recording well. You could also defer an audio interface if you were to download and install the freeware program called ASIO4ALL, which is incredibly easy to install and use - no real learning curve at all, and once it is installed and running, you never have to mess with it again.
Bob Bone