In The Things They Carried, Tim O'Brien is telling us stories about war and love and peace and all that, but he's also telling us tales about a bunch of guys who sit around telling each other stories. The stories are his way of processing his memories of the war, and therefore we can assume that they're the soldiers' method of processing what they're go through as well. Stories can bring dead people back to life, if only for an hour or so, and they can also reflect the horror and beauty of everything the men go through on a daily basis while on the front. And for O'Brien, stories can often be more true than what actually happened. (For more on "story-truth" and "happening-truth" see "Themes: Truth.")
By telling stories about the dead, O'Brien is able to bring them back to life, thereby saving not only their lives but his own: it's the only way he has to speak about his experiences.
The soldiers in Vietnam tell stories compulsively, both as a social activity and as a way to process the bizarre complexity of the war around them.