They're very sensitive and have nerve endings. Inside the inner lips is a tiny soft round area of skin that's often covered by a fold of skin. That's the tip of the clitoris. It goes back inside you body and is longer, but you can't see that part. It varies in length.
Some women have one that's much more of a protrusion, and some have one that's deeper set.
Women have the same general equipment, but it often looks different. The pictures you see in textbooks may look nothing like yours. As far as we know, the main purpose of the clitoris is for pleasure. The clitoris is the female equivalent and is perhaps even more sensitive because the area is concentrated in such a small place. Direct stimulation can sometimes be too intense.