Disruptor Beam has posted a very helpful introductory blog about reincarnation here: http://www.disruptorbeam.com/blog/entry/reincarnation-by-the-numbers
Reincarnation is an important process in the game that is entirely optional. It involves finishing Volume 1 of the story (no skipping ahead!) and completing the Cycle of Rebirth quest. Completing this quest will have the following effects:
-you will be able to create a new character (i.e. portrait, gender, name, etc.)
-your character level is reset to level 1
-your progress in the story is reset to the prologue
-buildings are removed and need to be built and upgraded again
-all silver is removed
-all non-permanent gear or SS are removed
-seals that are not attached to permanent items are removed
-all talent points are reset, except for ones with permanent points
As a result of this process, it's common practice to sell every item in your inventory before reincarnating and donate the proceeds to Alliance camps! After all, the only things that remain with you through reincarnation are:
-food (i.e. bread, ale)
-Alliance membership & friends
-seals applied to permanent items
-items/SS made permanent
Any building upgrades or Talents you've unlocked with Gold will remain unlocked, but you will need to spend silver/Talent points to upgrade them again. If you have any gear you'd like to make permanent, renaming it for 2 Gold is the cheapest option. SS can only be made permanent by unlocking a seal slot, which costs 3 Gold.
The reason reincarnation is important in the game is because choosing to reincarnate grants you one Talent point to make permanent. This means you can access Fealty talents outside of that Fealty--for example, you can be a Stark with the Lannister Mine building, which would be impossible without reincarnation. It also enables players to get multiple copies of valuable items, such as the Obsidian Dagger and the Seal of the Hand of the King.
It's most common to make the Fealty's building talent permanent for a few reasons:
-Since the stats on buildings add to your character's strength, having more buildings to construct makes you more powerful.
-You only get one Talent point per reincarnation, and so to get the full benefit of a talent with 8 ranks you would need to reincarnate 8 times in that Fealty. This includes Gold talents. Building Talents have only one rank, and so it only takes one reincarnation to unlock them. Putting one Talent point into a Talent with 8 ranks will not unlock that Talent, but will only make one rank of that Talent permanent.
-Having access to 5 of the Fealty buildings allows you to try and hatch a Baby Dragon.
Choosing whether or not to reincarnate is entirely a matter of personal choice. Hope this overview gave you an idea of whether or not you want to reincarnate!