1) What is the importance of andEngine.registerUpdateHandler(new FPSLogger())
?
2) is this just for FPS logging purpose?
1) Like you ask, it logs the current frames per second in the debug console.
2) Yes, it does nothing more.
The code:
http://code.google.com/p/andengine/source/browse/src/org/anddev/andengine/entity/util/FPSLogger.java
The most interesting method is onLogFPS(). Which gets called by the overided methods that andengine calls at certain intervals.