Watership Down is named after a real location in England that is, frankly, pretty boring. In fact, it's just a hill. There were no battles there, no famous speeches, no iPod factories or summer music festivals. (Actually, there were probably battles and summer music festivals, since those are everywhere; but there are no really famous battles or festivals.)
And that's kind of the point: it's just a boring hill. But while Watership Down (the hill) is not important to us, it is important to the rabbits since that's where they make their home. In fact, it's not the home that they start out at—it's the ideal home that they're trying to get to. It's the place they work together to reach in the beginning, the warren they build with their cleverness in the middle, and the home they fight to protect at the end. If this book is falls into the quest genre, then Watership Down is the object of their quest. So naming the book after that hill reminds us readers of what the rabbits are fighting for—even when they don't know it themselves.
Watership Down may not be important to us humans, but it's the place the rabbits call home. Naming the book after this place is another way of saying "humans aren't the only living things. Rabbits have needs, too."