The idea here (and this is why B&N added this feature to Nook Press) is that the online editor will speed up the fine-tuning step in the ebook creation process. Each ebook platform has its own quirks in how it displays ebooks, and that is part of the reason that many authors and publishers like to create a custom Kindle edition, iBooks edition, and (sometimes) a custom Nook edition of a particular ebook title. The custom titles simply look better than a generic Epub file.
Kobo want to make it easier to create that custom ebook for their ebookstore. They're hoping that this will give authors better control over the finer details of their ebooks and that it will result in better looking content after the ebooks have been converted to Kobo's proprietary version of Epub.
TBH, I am not sure the extra work is worth the effort. Kobo is still a tiny fraction of the global market and is in 4th or 5th place in most markets around the world.
But Kobo's small share in the ebook market could grow. Rakuten appears to be willing to continue to shovel money into Kobo in the hopes of gaining a larger market share. Kobo's sugar daddy has been funding development of new ereaders and expansion into new markets, and last October Rakuten bought Aquafadas with the goal of having Aquafadas add better support for digital comics and Epub3 in the KWL platform and the Kobo ebookstore. So far as I know this has not happened yet.
Kobo reported today that in the year since KWL launched, over 17 thousand authors have uploaded more than 100,000 titles, and are selling those ebooks in 54 languages across 184 countries. In spite of this success, you can tell from their submission requirements that they are still playing catch up.
Kobo Writing Life will accept Epub, MSWord and Open Office doc formats, and mobi files. That last is the older and simpler form of Kindle ebooks, and it is a concession to the fact that Kobo has to play catch up to Amazon.