Staking Atoms can be thought of as a safety deposit on validation activities. When a validator or a delegator wants to retrieve part or all of their deposit, they send an unbonding transaction. Then, Atoms undergo a three weeks unbonding period during which they are liable to being slashed for potential misbehaviors committed by the validator before the unbonding process started.
Validators, and by association delegators, receive block provisions, block rewards, fee rewards, and the right to participate in governance. If a validator misbehaves, a certain portion of its total stake is slashed (the severity of the penalty depends on the type of misbehavior). This means that every user that bonded Atoms to this validator gets penalized in proportion to its stake. Delegators are therefore incentivized to delegate to validators that they anticipate will function safely.