The urea component of pee is what makes pee smell like pee and give it a yellow colouration in higher concentrations
Its a good indicator of your hydration because if your dehydrated your kidneys will desperately try to retain as much water as it can which can lead to minor damage at high concentrations of urea I believe due to its acidic composition
An easy way to stay hydrated is to have at least 3 1L bottles of water per day at a low-moderate level of activity and monitor your pee to check if you are recieiving the correct level of hydration.
Another interesting fact is that some researchers believe that dehydration/insufficient water over time can exacerbate the systems of aging and cause much damage likening it to your cars...