If seedlings are allowed to grow too closely together, they will begin to compete for moisture, nutrients and sunlight. Thinning prevents overcrowding and provides a better environment for the remaining seedlings by giving them the proper space for good growth and development. Thinning also reduces the risk of disease by providing better air circulation around the plants.
To maximise crop yields, it is best to thin seedlings in stages, rather than all at once, to allow for any losses due to pests and diseases. Start thinning when the plants have one or two pairs of true leaves; you should aim to leave seedlings with a finger's width distance between each one.