Soaking peeled potatoes in water overnight before cooking them removes the starch from the potatoes.
If you have health problems and need to avoid starch then it's a good idea to soak the peeled potatoes in water overnight to get rid of the starch.
Soaking Peeled potatoes in water overnight is also done to keep fries from sticking together as well.
You don't have to soak potatoes overnight before cooking though if you don't want too.
I just slice the potatoes and cook them right away even without peeling the potatoes.