What is Theory?

The music dictionary defines the Theory of Music as:

"The understanding of the fundamentals of music such as notation, harmony, counterpoint, rhythm, melody, intervals, scales, etc."

 

Music Theory is the mathematics of music. It teaches us
how music works and why is works that way.

Is Music Theory really necessary?

No. And Yes.
For the more serious student theory is absolutely necessary. In the long run it makes music EASIER to learn. Having said that, many amazing musicians have no clue about theory and, on the other hand, many amazing "theorists" are poor musicians. The bottom line is that for the average person it is extremely helpful to have basic theory knowledge.