The most common way this works is piping an Ethernet connection to a Wi-Fi hotspot, but it can theoretically work in other ways. Sharing your internet connection on your Mac basically pipes your connection from one interface to the other.
It’s an easy way to turn the often-cheaper Ethernet connection into a personal Wi-Fi hotspot without paying the ridiculous extra fee for the privilege of accessing an insecure and slow network.
Those who have stayed in high-end hotels already know the answer to this question. You might wonder why, in a world of seemingly-infinite Wi-Fi connectivity, you would ever need to share your internet connection between devices.