Networks are generally used for determining what members see in the "what's new" feed, letting members associate with each other based on common profile information (without needing to be friends directly), and serving advertisements to specific groups of members. Each member can join one or more networks if you allow them to, and their networks will be shown on their profile. If you decide to have networks, be sure that they relate to your community's theme. For example, if your community has members from various countries, you can create a network for each country. If you want your members to see recent posts from other people in their networks (even if they're not yet friends with each other), you can adjust that setting here.
More info: See KB article.