Record types let one object support different business processes and picklist subsets. A new-business opportunity and a renewal can share the Opportunity object while offering different stages. The type also participates in page-layout assignment for profiles.
A record type doesn't grant object or record access. It shapes the experience for a user who already has permission. Keep allowed values deliberate: a renewal-only value should not appear in an unrelated process simply because it exists on the field. Test the active state and the layout assignment together. An inactive definition or an unassigned layout can leave a sound design unusable. Use stable identifiers, clear labels, and the smallest set of types that reflects distinct processes.