A user domain is an area where you can create and manage your user accounts. You can have one or more user domains on the same application. This is appropriate when there are different entities within the same organisation who need to share the same platform or there are various stakeholders who needs to manage subsets of users.
Portal settings and features can be applied to a user domain which will the affect all the users within, this will mean that you can apply different design choices for different domains. In addition users in different domains can have a different email template or notification schedule.
Putting users into different domains can also help you manage and restrict access to user data within your organisation. See this article for more information about how user domains work with roles and permissions How do Roles and Domains Work?