Entities are relevant pieces of information for your bot to extract from a user's expression and remember so that it can re-use it. Therefore, entities should only be used if these pieces of information are needed in the conversation.
For example, in the message "I want to order a large pepperoni pizza", entities like "pizza type" and "pizza size" are relevant pieces of information to place a pizza order.
If an entity is successfully detected, the bot will store this entity as a variable.
Entities can be:
See how you can check if the user input matches your entity inside of a Collect input block.
See also:
[New bot builder] Recognize expressions in intents
[New bot builder] Add an intent to your bot
[New bot builder] Train your bot