What the system will do with the remaining 20%?
The kernel will use the remaining physical memory for its own purposes (internal structures, tables, buffers, caches, whatever). The memory overcommitment setting handle userland application virtual memory reservations, the kernel doesn't use virtual memory but physical one.
Why is this parameter required in first place?
overcommit_ratio parameter is an implementation choice designed to prevent applications to reserve more virtual memory than what will reasonably be available for them in the future, i.e. when they actually access the memory (or at least try to).
overcommit_ratio to 50% has been considered a reasonable default value by the Linux kernel developers. It assumes the kernel won't ever need to use more than 50% of the physical RAM. Your mileage may vary, the reason why it is a tunable.
Why I should not always set it to 100%?
Setting it to 100% (or any "too high" value) doesn't reliably disable overcommitment because you cannot assume the kernel will use 0% (or too little) of RAM.
It won't prevent applications to crash as the kernel might preempt anyway all the physical memory it demands.