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What is the point of the narrator within a narrator?

I am currently reading Carmen by Merimee Prosper, and I am a little confused. I have noticed this with many older books (especially in shorter fiction): why are stories sometimes told in the form of storytelling? Why is the actual story of a book being told by a character who is telling a different character the story?

This isn't something I see often anymore today, at least not in this same format, and I understand why. Why is Prosper starting his novella with pages about the main character, when most of it is a different character telling the main character about an experience of his?

I am a writer so I understand a bit of the "behind thr scenes" when it comes to conveying certain emotions or methods to get thinga across subtly. I just don't understand the purpose of thia technique, as it really only bogs the story down (it is all written as direct speech). Why was this a commom story telling technique? What is it trying to convey or do?
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