Is it really necessary to have bone graft material placed into a molar tooths socket after extraction. Doesn't the space fill up with natural bone?

No, it doesn't fill. Alveolar bone, tooth supporting bone, dissolves away if there is no tooth to support. Sounds as if your a Dentist is trying to preserve ridge integrity in preparation for implant/crown replacement of the tooth to be extracted. It's sound advice...listen to your Dentist.
Yes but... While the socket will fill up with your own natural bone, in some cases the amount and type of bone will be improved with bone grafting. While I personally do not feel the need for this in every case, at the time of the extraction is the ideal time to implement this procedure in many cases. Trust your own dentist or find another one whom you do trust. Then follow his\her advice.
Partially. The extraction site will fill with bone but the nature of the bone will be denser and more suitable for an implant with the graft. In the case of upper teeth it's like replacing balsa wood with oak. Discuss this with your dentist to get a clear idea of risks, costs, and benefits before making your final decision...
It will. But in certain circumstances, the buccal plate of bone collapses and then there is not enough width of bone to place an implant. Bone grafting helps prevent that problem.