Well, it's important because seeing your buddy take damage triggers a CUF check. Stress is not damage, so seeing your buddy take stress (for instance, by failing a CUF check) does not trigger a CUF check. This eliminates one potentially enormous source of stress cascades.
To follow up on this, could someone get 2 stress per turn (action?, attack?), one from Panic Spreads and one from watching a buddy (the target that failed a CUF) take damage?
The stress from seeing a buddy take damage does assume line of sight I would hope, it's not stated.
Edit: Also page 77 states that stress is damage (may be a typo):
"You can suffer stress in several different ways. These are the two most common:
- By pushing a skill roll. If you push a skill roll using INT or EMP, you suffer 1 point of damage
for each  rolled on your base dice."
Edit 2: because im now reading this more in depth, it seems that in my above example, the subject would roll up to two CUF. 1 for panic spreading if the Target (their Buddy) fails their CUF, and 1 for seeing the Target take damage (regardless of the Target's CUF Roll). The second roll is against "potential stress" and each success negates one of the potential stress. Being suppressed is not the same as being Incapacitated, so in this example, provided both parties are in the same hex and within line of sight they would get the Unit Morale bonus.
IMO this is overly complex, and even more so if we do count Stress as "Damage", because RAW would then make the original target, the Buddy, make his own second roll against stress for seeing his buddy take "damage".
TLDR: Stress is a bit broken, and FL should maybe differentiate physical damage from stress in better terms. Clarity will help in this situation.
I do this in real life for fun on the weekends. #SurviveOmega #DoMoreWithLess