In essence, it is similar to Bitcoin Improvement Proposals (BIP) - that is, it is used to propose new protocol changes or standards for the network. ERC discussions take place in the Ethereum community on Github, and then changes are implemented if they are accepted by the main Ethereum developers and the broader crypto community.
The rules of this protocol determine the formatting and transmission of data, as well as the algorithm of actions to be taken in the event of certain events.
If we talk about the mechanics of creating a new ERC in more detail, then it happens as follows. Proposals are sent to the Ethereum community for consideration through an EIP - a project document that consists of information related to a new function or its process. Its key task is to provide full technical characteristics of the proposed function and at the same time justify the need for its implementation. After submitting the document, the community studies and analyzes it, and then makes its verdict - for or against. If approved by the community, developers implement a new ERC.
The most popular and in-demand Ethereum standard for requesting and receiving comments is ERC-20, the creators of which are Vitalik Buterin and Fabian Vogelsteller. It was developed as a response to the need of developers for a way to identify tokens in smart contracts. And now it reflects the general rules for the Ethereum blockchain, which all its tokens must comply with.
Among other well-known and widely used ERC standards, ERC-721 can be distinguished, with the help of which non-interchangeable tokens (NFT) are created. Non-interchangeability implies the uniqueness of each token, which distinguishes it from its own Ethereum currency, ether and other interchangeable analogues. Developers use this standard to create new types of digital assets that are relevant for use in various applications, such as crypto games.
Thus, ERC is actively used to improve the network and the overall development of the crypto industry, allowing useful changes to be made to their work, taking into account the opinions of users. And this, in turn, is nothing more than support for decentralization - one of the key principles of the existence and use of cryptocurrencies.