Short answer
Port forwarding is used when a service inside your local network should be reachable from the internet.
When port forwarding is used
Examples include game servers, camera access, remote desktop, NAS and test servers. The router needs to know which internal IP and port should receive the traffic.
Security risks
An open port can expose vulnerable services. Use strong authentication, keep systems updated and open only what is actually needed.
Alternatives
VPN into the home network, cloud tunnels or a reverse proxy can often be safer than opening many ports directly to the internet.
Common questions
Does port forwarding need static IP?
Not always, but dynamic DNS or fixed IP makes the connection easier to find from outside.
Does port forwarding work with CGNAT?
Often not, because the public NAT is at the provider.