This jobs refers to managing the state of Contracts that appear in the Service part of CRM. Contracts (not entitlements which are new) are used to record whether a customer can log cases. Contracts have begin and end dates. The Update Contract States job
changes the status of contracts that are past the end date to expired. Similarly contracts that are due to start in the future have a status of invoiced which changes to active when the due date arrives.
So if you delete the job contracts will not get expired or activated.
I don't think the job consumes much resource so I would recommend keeping it - even if you don't use contracts.