This breather cap allows the differential not to build up excessive oil pressure, which can lead to burst oil seals and localised oil starvation. Neither of these are traits you would want!
If the breather cap no longer functions correctly, renewal is so much easier than striping down the axle to replace the oil seals or worse having to replace the differential unit!

• Renewing this is a lot easier (and less expensive) than repairing a damaged differential.