What is the significance of the conversation between Raina and the man in Act 1?

The conversation between Raina and Captain Bluntschli in the first act of Arms and the Man by George Bernard Shaw sets up the initial conflict in the play and points towards its resolution. There are really two conflicts in the play, one occurring on the level of ideas and one on a more personal level.
On the level of ideas, we see in this conversation two different views of war, the romantic one presented by Catherine Petkoff and the pragmatic one espoused by Captain Bluntschli. Raina is torn between these two views. Gradually, as Captain Bluntschli educates her concerning the realities of war, Raina becomes convinced of the truth of his more pragmatic understanding of war as a profession.
On a personal level, this is the beginning of the central plot, in which Raina and Captain Bluntschli begin to fall in love. We are introduced to a discussion of Sergius, who is the main rival of Captain Bluntschli for Raina's affections. We also get a sense that although Captain Bluntschli as a soldier with a gun might superficially appear the more powerful person in the relationship, Raina is actually in many ways braver and more decisive, and thus get a sense of Shaw's own somewhat quirky form of feminism.