Domain forwarding is exactly what it says, the domain just forwards to some other website.  What happens is the person who owns the domain wants the domain, but wants to use the domain on a site they already own, so they set the second domain up to forward to the first domain.  

There are many reasons why someone might want to forward a domain.  Think of a company that sells a product.  Say for example, you own a company that sells flower seeds and the company name is Company DEF, you may want to use both the domain name flowerseeds.com and the domain name companydef.com.  Domain forwarding allows you to use both domain names without having to build separate sites for each domain, you can just have one of the domains forward to the other.