
It is the baseline level of data security for your records. OWD specifies the absolute strictest level of access that the most restricted user has to records they do not own.
Think of Salesforce security as a house: OWD is the front door lock. You start by locking it down, and then you use other tools (like Role Hierarchies, Sharing Rules, and Manual Sharing) to open up windows and inner doors for specific people. You can never use other sharing tools to restrict access more than what the OWD specifies.