Why do we need *.lib files?

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I don't seem to understand the need of *.lib files. Let's say I have 3 *.c files:

module1.c
module2.c
module3.c
myheaders.c

In each .c file we have 2 functions. Now if I call function x in module3.c from module1.c, module1.c knows about function x by looking in myheaders.c.

So if I compile this in VS I get a shiny little portable *.exe with no *.lib file attached, so why and when does one need *.lib files?

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