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FTP connection is not required, you may skip it. FTP is used for images - downloading and uploading images for products, categories and Manufacturers. If there is no valid FTP connection specified, you will not be able to view images and upload them to your server.
Advanced settings: Images directory Every FTP user has home directory - some directory on the server where user are connected to by default. Depending on specific configuration or FTP account settings it may be different from one server to another. After server address, user name and password specified you may just browse your FTP and select which directory used to store images. If you want to type path manually start from user home directory as it shown above. Note: FTP account (settings - login/password) used for image management must have rights to read/write appropriate directories otherwise FTP feature may not work properly.
See an example of properly configured FTP below:
FTP settings: