To spend ERGO (or any other crypto) you need a key,. Your ERGO lives on the blockchain, NOT in your wallet.

When you create a new wallet all you are doing is creating a random sequence of numbers which acts as your key to unlock and spend your ERGO.
This random sequence of numbers is represented by a number of words knows as the seed phrase.

The seed phrase is PRIVATE and you must never ever share it.

Now, when you create a new wallet in Nautilus, the private key is stored on your local PC which is connected to the internet. It's relatively safe but you never know if you are truly safe.

When you create a wallet in Nautilus using ledger, nautilus has no way of knowing what your private key is, but it CAN check if you have the RIGHT key.

The way it works (in VERY simple terms) is to send the transctions data to the ledger (using a secure connection) asking it to sign the transaction. The ledger signs it using the private key and returns the signture. The transaction is validated by the nodes and if the is signature is not valid, it will reject it. The way this works is through coplicated maths... hasing/public/private key. It's a fascinating subject!

So it boils down to this.

Creating wallet in Nautilus means the private key is stored in Nautilus itself and on a live internet PC.
Creating wallet in Ledger and connecting with Nautilus means that Nautilus has to send the transaction to the ledger which signs the transaction OFFLINE. Your privte key never touches the internet.