Why use"it" here?

He lives in a house with big trees all around it.

I know "all around" is a adverb, but what is the point of using the pronoun "it" behind a adverb used as an adverbial?

All around can be an adverb; or rather, an adverb (around) modified by another adverb (all).

In this case, though, around is not an adverb, but a preposition, and it is its object.

There is a difference between saying all around (meaning ‘everywhere’) and all around [object] (meaning ‘surrounding [object] on all sides’).

You could move things around in the sentence and instead say:

There are big trees all around the house he lives in.

I hope you can clearly see why just removing the object here would change the meaning rather radically: you'd end up with only “There are big trees all around”.