@cadffm and @martti.halminen gave excellent explanations. I would just like to add that an entity name, though only temporary, is your gateway to the properties of entities and your ability to change those properties or use them for whatever your purpose. Going back to the olden days before ActiveX, they were our only means of access to entity properties.
For example,
(setq e (car (entsel "\nSelect an entity: ")))
would return an entity name and save it in the variable e.
Then,
(setq ent (entget e))
would return the list of dxf codes and values for most all of the entity's properties.
Though many of us these days tend to use ActiveX methods and properties, it would be good for you to learn most of the dxf codes, and how to use (entmod) and (entmake), or (entmakex).
I hope you don't mind this old fart chiming in. I bought a used Sunfish sailboat this summer, and quickly decided to name it "Auld Phart." When my eldest daughter came down from Maine to visit this summer, I took her down to the club with no clues and she found it in less than a minute. I guess I still have a little bit left in me since I lapped the fleet twice in my first race in 30 years.