A domain is your private address on the internet.
You can build a website if you want but for many people having a domain is a way of ensuring you never have to change your email again. If your email is currently something like your.name@yourisp.com.au and you change to a new ISP you will have to let everyone know your new email address.
However if you have a domain such as 123host.com.au and use that for your email address e.g. something@123host.com.au, no matter who your ISP is your email never changes.