A "confirmed address" is useful if you want PayPal to offer fraud protection on transactions. A confirmed address is generally one that has been validated to match the purchaser's credit card billing address, or in some cases verified by PayPal sending a letter by snail mail with a code for the customer to type into their account once they've received it, thus confirming that the customer has access to mail at that address and thus theoretically is authorized to claim that address as theirs.
If you allow unconfirmed addresses, then PayPal will not offer you their Seller Protection service for those transactions. There may be some exceptions to that ... I'm not a PayPal employee, so I'd recommend contacting PayPal to ask for clarification on what the limitations are if you choose to allow unconfirmed addresses.
So, despite not actually shipping to the customer's address, having a verified billing address does offer significant benefits, even if the customer is a little annoyed at being asked to provide it.
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