When using projects, you can dedicate a certain amount of tracked time to a particular activity you did for the project. For example, you prepared a report for one of your customers. So, you would create a project called Client A.
However, you can have a detailed breakdown of projects as well. Creating tasks under a project allows you to track time for different things that you have been working on while on the project. It could be Client A - Preparing reports and Client A - Designing graphs. Preparing reports and Designing graphs are tasks, in this case.