It is explained pretty thoroughly in the Codex, in my opinion. It serves a purpose e.g. when you want to grab posts for your taxonomy, it is a URL slug for your taxonomy, e.g.
Note: The query_var is used for direct queries through
new WP_Query( array( 'people' => $person_name ) )
and URL queries like
false will disable these methods, but you can still fetch posts with an explicit
WP_Query taxonomy query like
query_var is part of the WordPress Query Vars.