What is the problem with heat soak?

I’ve been reading the info dump and other links regarding heat soak and everyone’s attempt to prevent/reduce HS. However, as a newbie, I’m not clear on the exact problem.

Is it just an issue for guys who want to take their car to a drag strip and experience temporary reduced hp because of heat soak?

Or is heat soak causing permanent damage to components on the car? If so, is it just happening when racing or does it happen under normal driving conditions?