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By default, rip acts as a classful routing protocol, which means it will summarize on classful boundaries unless you tell it not to.
In your first example, with auto-summary on, 192.168.3.0 is a classful network, a class C, hence it's being advertised with a /24 mask.
When you turned it off, it advertised it as a /30, which tells me that the interface is configured with a 255.255.255.252 mask.
If auto-summary is on, you shouldn't be seeing the /30 mask.
As for why it's needed, it's really not needed. But if you're designing your network along class boundaries, it's useful. You do want to summarize when possible, it keeps your routing tables small
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