Of course, inactivity timer helps to improve system as well as UE performance.
There is a concept drx i.e. discontinuous reception cycle which is configured by eNodeB for an UE. By using drx, battery life can be saved for an UE.
There is another concept "User inactivity" which is being used to detect inactivity of UE at the eNodeB. I mean to say neither data is coming from UE nor data is going through eNdoeB. In that situation, keeping UE Context and some resource reservation is worthless. To achieve better resource management, an eNodeB may runs a timer (user inactivity timer) . Once the timer gets expired, eNodeB indicates to MME using "Ue Context Release Request" with cause "user inactivity" . MME initiates S1-U bearer release procedure and responds to eNodeB using UE Context Release Command message.
When eNodeB receives "UE Context Release Command" message from MME, it initiates RRC Connection Release procedure for that UE.