What is the purpose of custom domain in Salesforce?

Hi,

Adding some more points in it -

Use My Domain to Create Your Own Subdomain Name
Create your own subdomain to better manage login and authentication for your Salesforce org. A subdomain is also a way to brand your org with your company name.
While you’re learning to use My Domain, don’t perform these steps in your production org. For a good introduction, see the Trailhead module, User Authentication. After you deploy your new domain name, you can’t reverse it without contacting Salesforce Support.

Creating a My Domain subdomain helps you better manage login and authentication for your org in several key ways. You can:

• Highlight your business identity with your unique domain URL
• Brand your login screen and customize right-frame content
• Block or redirect page requests that don’t use the new domain name
• Work in multiple Salesforce orgs at the same time
• Set custom login policy to determine how users are authenticated
• Let users log in using a social account, like Google and Facebook, from the login page
• Allow users to log in once to access external services

Implementing a custom domain for your site creates brand recognition and gives you additional control and functionality.

Create a CNAME entry in your DNS
1. Click Setup.
2. Under “Administer,” click Domain Management | click Domains.
3. Click Add A Domain.
4. Copy the 18 digit token. This token is case sensitive so copy it exactly as displayed.

Add the Custom Domain information to Salesforce

This is a 2 step process, first you’ll need to add the domain information to your org, and then you’ll map the custom domain to your Salesforce Site.
Add the domain information to your Salesforce Org

1. In your Salesforce Org, click Setup.
2. Under “Administer,” Click Domain Management | click Domains.
3. Click Add A Domain.
4. Enter your custom domain in the Domain Name field

Hope thisd helps.