Advancing the timing makes the expansion pressure peak closer to when the piston starts moving down, which increases torque, and allows the gasses to expand longer, which increases efficiency.

If you go too far it starts expanding before TDC and the piston has to try and compress the already expanding gasses, which will stress the headgasket and hurt power output. That will sound like shaking a bucket of nails when you accelerate and the engine will be hard to start.

MB had to meet emissions at the time and retarding the timing lowers combustion temp and NOx production.