you dont need to have the factory switch installed when going to a gauge but
you wont have a low oil pressure idiot lamp incase oil pressure drops below 4psi ,
and that switch is a combination switch that provides a secondary source for 12v to the fuel pump should your relay fail it will provide power to the fuel pump as long as oil pressure is above 4psi
many just remove it and be sure that the connector is secured in a safe way to prevent it from getting grounded on the block and , also the rubber can deteriorate over time and can short out if wet or the terminals to contact each other causing fuel pump issues and popped fuses