Solutions are a key mechanism for utilizing the Application Lifecycle Management (ALM) cycle. ALM is integral to enterprise and agile development infrastructures and ultimately makes governance, maintenance, and development manageable for teams.
Solutions contain all of your projects assets such as Power Apps, Power Pages, Power Automate, Dataverse, and other web resources and enable organizations to develop easily deployable and portable products. Due to the portability, organizations can easily setup their deployment environments such as development, staging, and production with just a few clicks. This also allows developers to independently create a project in their own tenant and provide a packaged solution to an external client on a different tenant. In instances where solutions are not used, developers are required to export each component associated with the project individually and import it. This increases the risk of erroneously importing older components which may result in your environment(s) becoming out of sync. However, utilizing Microsoft's solutions counters this risk and provides additional benefits for your deployments:
Patches
Roll-backs
Version control
There are two types of solution deployments available to users: unmanaged and managed. Unmanaged solutions are used for development and test environments. They allow developers to continue modifying the components within the solution. Managed solutions are non-editable deployments. They are solutions that are ready to be deployed and installed in your stage and production environments. Managed solutions cannot be exported. Keep in mind, Microsoft does not allow you to import a managed solution into the same environment as an unmanaged solution that you export from. As such, it creates the need for another environment to import and test your managed solution.
Solutions are your go to for streamlining your deployments and the contents within them. But, more importantly, solutions offer organizations the ability to manage the ALM without the need for third-party applications for version control like Git. Lastly, building with solutions allows organizations to monetize their application. Once an application is created once, then it can be deployed to "x" number of tenants, each with the potential of variations to suit that client and their unique needs.
When you look at solutions from the client perspective where there are often multiple service providers providing development services for different pieces of functionality. Solutions enable the multiple service providers to develop and deploy their deliverable alongside one another without interfering with one another. In addition future needs for solutions developed by a previous service provider can easily be accessed and updated by another service provider.