It links you to private streaming apps privately hosted. I used it for a while but at the time installation and updating it was a real pain. If you didn’t update it it often wouldn’t work.
That's a secondary function, accomplished through plug-ins.
The actual purpose of KODI is to be a media center, like Plex (but much older). It started as the Xbox Media Center (XBMC) with the ability to play multiple formats of videos, and to launch games/apps on modified Xbox game consoles.
Eventually they moved to computer, expanded to allowing plugins that run advanced scripts or launch outside programs. People put 2 and 2 together and created plugins that link to video sharing websites, scrapers, and IMDB (or similar services) to create a quasi-functional "free TV" experience. Usually buggy, video is real hit or miss on quality, and they need to be updated often to keep up with the sites they link to being taken down.
But for the core functionality, playing media files on your computer/network it really can't be beat. Low resource overhead, supports pretty much all hardware, runs on multiple operating systems, is rock solid if you don't load it up with hinky plug-ins, and has basically every audio/video feature you could think of as well (though some may be buried deep in menus).