At any given time, a firm has a slew of work being performed by many different people assuming many different roles. Within those jobs, many individual activities are being completed to ensure the client is served. These activities may or may not be billed for and when billed, at differing rates depending on who completes the work. As the work is completed, time is logged against these activities to ensure fixed fees are profitability for the firm while, for time and materials engagements, client-based activity is billed back to the client.
To enable the ability to track these activities, to associate them properly on work templates and work items, to track what is billable, and to associate the right billing rate—you need to update your task types to suit your firm's needs.
To be more specific, a Task Type is what you record your time against, indicating the type of activity you are doing within the Role you have chosen. By adding a Task Type to a task you are linking the actual tasks to your allocated budgeted time.