You've probably already used entities without calling them that. This keystroke combination is a standard predefined entity in both HTML and XML that lets you access a particular ascii character without having to memorize the character set number. Suppose you have a paragraph, like a copyright notice, that you use in every single document. You could type that notice over and over again. Or, you could use an entity to call it forth in place.
Entities can reduce errors .
By the 101st time you type that copyright notice, it is likely your poor fingers will be so tired you'll make an error and set your copyright for 1989 instead of 1999. Using an entity can reduce the potential for these types of errors. Entities are easy to update. Without an entity you'd be searching and replacing throughout your document set. Entities can act as placeholders for TBD information.