1) It hold the history of the boy's personal Cub Scouting career - a symbol for each badge, arrowpoint, and rank achieved. It is possible to earn more Webelos badges after earning the Arrow of Light. Many boys go on to earn All 20 Webelos Badges.
2) Arrow of Light ceremonies don't always happen at the same time as Graduation; sometimes the Arrow of Light is earned several months before Graduation. A Webelos should be awarded his Arrow of Light soon after he earns it, rather than waiting until graduation.
3) It's a little more convenient to plan around graduation, because graduation month is predictable and is less likely to sneak up without warning.
I have heard of three different ways to make a Career Arrow.
The one above is made wrapping colored embroidery floss around an arrow. Here are INSTRUCTIONS for the colors you could use to symbolize certain awards earned. There are no official rules for the colors, though. These are just ideas.