It shows how much Jame's attitude changed in order for him to become a Prefect. He went from a bully to a well behaved studnet. The change in his attitude was signifigantly for his head of house to appoint him as a Prefect.

Perhaps Lupin was a better influence than he thought. Or maybe James just really wanted to impress Lily. I'm sure since they were both Prefects they had plenty of time to get to know each other better and fall in love.