The C and N lines (like what you pasted) are what each server uses to tell what you allow it to link to and what to allow to link to it, one is incoming and one is outgoing, and both are needed because the IRCd has to approve of an incoming link or reject it. This stops just anyone linking as they please to your server. The outgoing one is simply you telling your server to connect to another.
The /connect command you asked about is what you type in mIRC to get the servers to connect and synchronise. Though this isn't needed if the IRCd has a function that allows automated connecting.
