Guano was one of the main sources for saltpeter - and hence gunpowder.

There's an ancient thread going into some detail on the process with a couple very good answers by /u/killfile and others, but essentially guano was the single best pre-industrial source for the hardest to obtain precursor of gunpowder (charcoal and sulfur being readily available and fairly cheap, with a formula for 16th century cannon gunpowder having saltpeter being used in a 6-1-1 ratio compared to the other two components to give you an idea of its relative importance.) If you really want to take a deep dive about how the refining process worked, why guano above other materials, and the various, sometimes violent efforts to obtain sources, I'd recommend David Cressy's Saltpeter: The Mother of Gunpowder as a read even though it focuses primarily on Great Britain's attempts.

As far as the Guano Islands Act, it's important to keep it in mind not only as a plan by the then-Senator Seward looking to secure potential guano mines as sources of saltpeter, but also in the context of an early sign of how he viewed American expansionism that aggressively came into the open once he was Secretary of State. I've written before about his role in the Alaska purchase and it's very clear from Seward's history that the Guano Islands Act was his first concrete step taken not just for military security - indeed, with the 1861 Trent incident, the threat of a British embargo on saltpeter was an extraordinarily serious threat to the Union even excluding the very real potential of a minor dispute escalating to outright war - but for territorial purposes as well.