There are different types of users with different privileges. There can be an Administrator user who will be a Window super-user. There can be a Guest user that has limited access. There can be regular users, which would be most users that run applications and perform daily tasks as usual. You manage these different users in the Local Users and Groups area.
A group is a logical collection of users. Users generally belong to one or more groups. Common groups include Administrators, Users, Backup Operators, Power Users, etc. A group makes it easier to apply common shared permissions for a bunch of users.
