What does udisks-daemon do and do I need it?

Official package description for udisks:

The udisks daemon serves as an interface to system block devices, implemented via D-Bus. It handles operations such as querying, mounting, unmounting, formatting, or detaching storage devices such as hard disks or USB thumb drives.

This package also provides the udisks utility, which can be used to trigger these operations from the command line (if permitted by PolicyKit). External tools such as hdparm are used if available to implement extra operations, such as configuring disk spindown times.

Creating or modifying file systems such as XFS, RAID, or LUKS encryption requires that the corresponding mkfs.* and admin tools are installed, such as dosfstools and mtools for VFAT, xfsprogs for XFS, or cryptsetup for LUKS.

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Do I need it?

This should be considered an essential package by almost everyone. The only time I would consider removing it is if I had a simple /dev/sdX CLI install on a machine where there was no need for udev -- i.e., the hardware never changes (which in practice almost always means a virtual machine, a VPS or a very very old machine).