What does an external video recorder like a Ninja offer? According to the Ninja Website 


  Take your consumer camera to a truly Pro recording device. Avoid the internal MPEG compression &amp; go from sub 30Mbps MPEG to 220Mbps ready to edit 10-bit 422 Apple ProRes HQ.


This External Recording article from Nikon states


  Another useful optional accessory that is often used on more professional video productions is the external recorder. With an external recorder such as an Atomos Ninja attached to a Nikon HD-SLR, you can record a higher quality, uncompressed video signal from the camera directly to the external recorder via HDMI.


I'd like to understand what this means in layman terms? Will the image be sharper frame by frame? Is it like watching a higher FPS? Just more data to pull from when Grading? Is it useful on all video cameras or only high end ones?

If the final video is ultimately going to be uploaded to YouTube would it make a difference?
If you record (typical AVCHD) sub-30 Mbps 4:2:0 video to a card and 220Mbps 4:2:2 video to an external recording device, you will be hard pressed to tell the difference when you view it back on YouTube.  Very, very hard pressed to tell the difference.

However, if you plan to edit the video--changing contrast curves, color, saturation, etc., and especially if you are trying to key any region (whether for green screen replacement or because you want to muck with certain color ranges in certain ways), or if you want to digitally zoom in a bit, then you are going to immediately notice a large difference in how the video behaves in your editing program.

What makes the low bit-rate recording work so well is that the compression algorithms are very smart about fooling our vision system, which is very easy to do.  But such smarts break down almost immediately as soon as you start treating the video as a series of images to be manipulated (which is how video editing programs ultimately "see" the video).  That's when you are going to wish you had recorded in a format that is more true to the digital workflow and less clever about how easy it is to fool our vision system.

If all you ever want to do are the simplest of cuts and fades, you can do that with low bit-rate video.  But if you want to push the image around more robustly, you will quickly realize the need for a higher bitrate solution, which is what the external recorders give you.