This enables you to give different prices for different groups of customers. You can achieve individual customer price lists by having just one customer in a group of the same name.
For example, you may have groups for Wholesale or Trade Customers, Most Favoured Clients, Loyalty Scheme customers.
A customer can sit in up to 8 groups and the system typically looks to offer the cheapest price it can find from any of the groups the customer resides in.
Read here on how to Add A User Group and other uses for user groups.