What is the purpose of namespace in salesforce?

Namespace prefixes are used in managed packages to differentiate custom object and field names from those in use by other organizations.
Example: Let's suppose two companies are making an app and both companies create a custom field on the contact object called Name. Each company has its own unique namespace, which prefixes the names of all of their components. Company A's name field might actually be called CompanyA__Name__c, which makes it different from company B's name field.