Feeding rabbits a balanced diet (including rabbit pellets) ensures proper nutrition and helps promote long-term health. Many other websites will recommend limiting the use of pellets and supplementing with hay (because most pellets are terribly unbalanced). I totally agree if you are feeding pellets that are loaded with grain and soy. However this limits the nutrients (provided by the pellets that are naturally limiting in hay) that rabbits need for long-term health. This his why most veterinarians recommend feeding at least some pellets. Here I explain in more detail why pellets are important and how to choose what foods to provide for your rabbit to promote optimal health.
In nature, rabbits will alter their consumption of different foods according to the seasonal availability and according to their life stage. Although rabbits will do okay consuming only food found in the wild, it is not efficient because, although a particular food item in nature may be rich in one nutrient it will be deficient in others. Because of this, domesticated rabbits which have more specialized nutritional needs, will be healthier when consuming pellets with their fully balanced diet.
Think of building a rabbit from miniature blocks. Some blocks are needed in a large quantity while other blocks are needed in trace amounts. The food a rabbit eats supplies a mixture of these blocks. Although some of these blocks can be stored for later use, many cannot and must be consumed daily. Providing these other nutrients in the diet in the proper ratios greatly improves health. However, if one of the blocks had a limited availability in the diet it would reduce the usefulness of all the other blocks (they'd get wasted). Any overload of nutrients that are not used will have to be processed and eliminated. The elimination of some nutrients can be stressful to the organs of the rabbit.
For example, the protein in most foods made for rabbits usually isn't balanced. Instead the manufacturers simply put in more than is needed so that the rabbits gets "enough" of the limiting amino acids. Sadly the overload of the other amino acids leads to digestive troubles and ammonia production (bad smell in the litter box). The ammonia you smell is actually wasted protein.
With this in mind it is important to understand that feeding rabbits pellets designed for "rabbits of all age" is likely to cause problems for rabbits of all ages. Instead, we should feed a balanced diet designed according to life stage. For example, baby rabbits and their moms should consume a high energy baby rabbit pellet that is low in starch but high in fat and fiber. Adult rabbits need a low energy rabbit pellet that is rich in timothy hay (or other grass hay) complemented with natural oil seeds and chelated minerals for optimal health. Alternatively you can feed your adult rabbits loads of hay along with a pellet designed to supplement this type of diet with the nutrients the hay lacks. This is the design behind the Fortifying Essentials rabbit food.
One other consideration you should keep in mind is the size of the pellet you feed your rabbit. This is because large pellets often cause waste whereas pellets that are too small can lead to digestive problems. The ideal size is a pellet with a diameter around 3mm or 1/8 inch. If the pellet is larger (thicker) then baby rabbits tend to bite off only a portion of the pellet while dropping the rest on the ground. Feeding rabbit pellets that are smaller in size or made from finely ground ingredients increases the likelihood of digestive troubles.