Default work schedules are where you set the standard working days, working times and holidays for your organization.
These default work schedules are then used as the basis for creation of project specific work schedules and/or users individual work schedules.
Those project and users work schedules are then used to schedule tasks.
See Work Schedules for more information on this entire process.
Setting up default work schedules with your standard hours of work and company holidays, streamlines and reduces the amount required to maintain schedules. You set up the most common work schedule settings in the default work schedules and then automatically apply them to user work schedules and project work schedules. That way you don't have to edit every individual work schedule and user and project work schedule if they use the defaults. You would only edit them if there were anomalies or changes from the default.
This also provides consistency and eliminates errors. For example, you set up all the company wide holidays once and those will be automatically applied to each user and project. You don't have to worry that holiday was forgotten or missed on an individual user or project work schedule.
Also, if you change the data in the default work schedules, it is automatically applied to all project and users using that default. You don't have to go and edit each individual one to make the changes, you just change it once in the default.