I am interested in knowing why \'%20\' is used as a space in URLs, particularly why %20 was used and why we even need it in the first place.
Because URLs have strict syntactic rules, like / being a special path separator character, spaces not being allowed in a URL and all characters having to be a certain subset of ASCII. To embed arbitrary characters in URLs regardless of these restrictions, bytes can be percent encoded. The byte x20 represents a space in the ASCII encoding (and most other encodings), hence %20 is the URL-encoded version of it.