Simply put...it's a switch that is controlled by another switch.
Here is an easy example:
You have parking lot lighting supplied by by a 3Ø 480v 40A circuit.
How do you control it?
- You could have the hired help turn it on/off at the desired times with a switch
- You could use a photocell (if you could find one that is rated)
Each of these methods has it limitations:
- The store is closed on the Holidays, but you still want the lights on for security. Do you want to pay the help to turn the lights on/off?
- Still looking for the that rated photocell?
So you get yourself a contactor with a 120v coil and contacts rated at 3Ø 480v 40A.
Now you wire the photocell to the coil. When it gets dark, the photocell does it's thing and completes the circuit to the coil. The coil closes, the lights come on. When dawn comes, the opposite happens.
Here is a little animation of what happens: http://electronics.howstuffworks.com/relay1.htm
The photocell could be a switch or a time clock.
Think about how a sump pump works...how does it know when to start or stop?
On a grander scale, that would apply to a water treatment facility, car wash, etc.