There’s a lot of variation of what it can be used for. Normal maps are a prime example of baking; you get two meshes - one low detailed and unwrapped, the other high detail, and then you bake not the lighting, but the “normals” of the high mesh (that is , the direction of the faces) to the low mesh. This results in an illusion of the low poly having detailed textures… it’s a bit to get your head around at first and it’s easier to start of just thinking in terms of mapping light and shadow.
In terms of saving, the baked map tends to replace the UV map you are baking to.
Edit: I thought I’d attach an example of a finished bake. Here, I have baked the normals of one mesh (the Suzanne monkey) to the UV map of another mesh, the cube. The result is that it looks as though I have modeled Suzanne into the surface of the cube. I could have baked the colour of the mesh, or any other rendering property, though I just chose “normals” as these make a bump map for the effect you see here. Normal mapping is a pretty extreme example though. If you are just getting to grips with baking, think of it as the ability to paint the UV map (surface) of a mesh as based on other object. I hope this normal map example doesn’t confuse you… it’s probably not the best example to show straight up.
baked_UVmap.blend (364 KB)
If you have GLSL (most do - can see shadows in 3D view) when you move the lights around, or rotate the cube, the baked normal map will act just like real bumps. (If you do not, just hit [F12] to render). The “baking” is the process I used to create the bump map.