With NGUI, an Atlas prefab is used to contain sprites and fonts. It is composed of the following:
A large texture file containing all sprites and fonts
A material with this texture file assigned, and a specific shader
The Atlas prefab has a UIAtlas component attached to it. Its purpose is to contain information about your sprites' positions and sizes in the large texture.
It is much more efficient to use only one large texture that holds all our sprites, instead of having separate multiple small textures.