This is Golding's way of allowing you, the reader, to enter Simon's mind and read his thoughts. Simon's conversation with the LOTF is nothing more than the thought stream that Simon has been having since stepping foot on the island. This "conversation" can be broken down into two main parts.
The first important piece is learning how Simon views himself on this island. He recognizes that the other boys think he is weird, "batty". He understands that his thoughts, views, and opinions won't be worth any weight with the other boys. This is important because any realization that Simon has about the true nature of the beast will be ignored by the other boys who badly want the beast to be something that can be hunted and killed.
The second important piece to this conversation is Simon telling the reader exactly what the best really is. The LOTF mentions how silly it was to think the beast could be killed, that all he really wants is for the boys to "have fun" on the island. The LOTF goes so far as to say that anyone who interferes with having fun will be killed; of course, this becomes true for Simon, Piggy, and almost Ralph.
For the reader, this conversation as a whole is important because you finally understand that the beast is something inside the boys, always was. We feel bad for Simon's inability to warn the other boys, but we also feel helpless for the others as they prepare to tear each other apart.