better late than never?

Why does the OH leave in the 4th step? why does this need to happen? 

 

thanks in advance

Because otherwise how do you form the ester? You could also consider reaction kinetics and thermal stability, but I think that might be a more complicated answer than you're looking for.

I just don't understand why it can't chill in 3rd form. I can memorize the mechanism but I'd prefer to know. 

Because there's acid present. The OH is easily able to coordinate a H+ from this, which turns the OH into water (a very good leaving group). 

@OP, Which is a better leaving group, hydroxide ion or water, and why?

The water because it is under acidic conditions?

All else held equal, stronger bases make poorer leaving groups than weaker bases.  Strong bases are less able to stabilize negative charge than weaker bases.  Which is the stronger base?

the OH 

I would put a minus sign on it, to indicate that it is hydroxide ion.  And we can compare the pK_a values of the conjugate acids of any two leaving groups to determine which base is stronger.

ahh yes thank you