It is all about Google and it is all about having the best result on Google and that is when SEO or search engine optimization comes into the picture.
One important method to build good result is to have as many sites as possible sending links to your website. This is what Google call natural link building you provide some good content and then somehow hopefully people discover your page and then provide links to your page.
Another approach is to pay someone for links that come from highly reputable websites to your domain and get a better ranking.
Finally you can get your own network of domains and then from those domains point to your final and important domain (lets call it the destination domain).
If you go with the last option which is what most professional seo experts do then you need to make sure that your back domains do not look as if they are owned by the same person. Here is where seo hosting comes into the picture. The job of this type of service is to make sure your back domains seem as faraway and not related to each other as possible.