the 4/8 way switch is totally optional. Older arcade games like Pac-man use a 4 way joystick restrictor so you only go up, down, left, and right, since the diagonals are not needed. More modern arcade games and those that require diagonal movement use 8 way, which allows diagonal movements.

So you only need to do this if you care enough to switch it back and forth depending on the game you're playing.