The Piloting system is the only subsystem to require being manned (as of Advanced Edition the Doors and Sensors subsystems can now be manned for a 1 level bonus). When manned, the ship gains evasion, a stat that allows for a chance to dodge attacks. At higher levels, an "autopilot" is installed, allowing for a certain amount of this evasion stat to be retained in the event that the cockpit is not manned. It must be manned, however, in order to activate the FTL drive.
Upgrading this system won't change anything for manned piloting. It will, however, prevent the ship's evasion from instantly dropping to 0% after one damage to the piloting room. In Advanced Edition, the autopilot evade rate is buffed by 25% and 30%, respectively, for each upgrade.
It's also important to recognize manned vs. unmanned bonuses differences. If both Engines and Piloting are manned, there is a basic crew bonus of +10% evasion (+5% evade from each manned system, even more if crew are skilled). When auto-pilot triggers, it calculates evasion of the ship granted from the Engine base bonus; it does not calculate crew bonuses into the percentage retained.
AE Example: Level 5 Engines (25% BASE evasion) manned by a Master Engine crewmember (+10% evade) and Level 2 Piloting (will retain 50%) manned by Master Piloting crewmember (+10% evade) grants a grande total of 45% evade. While unmanned, the total evasion becomes 12.5% (50% of 25 BASE = 12.5).
If the Engines were manned by the Master Engine crewmember but the Piloting was not, the total evasion would become 22.5% ((50% of 25 BASE) + 10 master manned bonus = 22.5).