Most stablecoins (USDT, USDC) are backed by cash and short-term government bonds held by the issuer, who promises to redeem 1 token for 1 dollar. Others are backed by crypto locked in smart contracts, or try to hold their price with algorithms — the riskiest kind, as the 2022 collapse of TerraUSD showed.
Stablecoins are the main currency of crypto trading and DeFi, and a fast way to move dollars across borders. Their total supply is a good signal of how much "dry powder" is in the market. When a stablecoin trades away from 1 dollar, it has depegged.
Example
You sell 0.1 BTC for 7,000 USDC instead of cashing out to your bank: you are out of Bitcoin's price swings but still on-chain.