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You can think of DefinedTypes as a kind of dictionary of possible values for a particular thing. The particular thing is the 'defined type'. In Rock, developers can define types of reusable fields and their possible values using this generic entity (DefinedType and DefinedValue; stored in the respective coreDefinedType and coreDefinedValue tables). For example, there is a well-known DefinedType called Record Type which has the following DefinedValues: Person and Business. There is another type called Record Status which has these values: Active, Inactive, and Pending.
NOTE: By convention, any entity that has a property that ends with *TypeId is a reference to the DefinedType.
Instead of having to create many miscellaneous entities and tables to hold these various dictionary-lookup values, developers can simply rely on DefinedTypes in the Rock framework to manage this data.