A select box gives you the option to choose what type of link you'd like to create. When set to URL it gives you a text box to enter the hyperlink. When set to Entry it opens a stack with all your entries to choose from. And when set to First Child will redirect a visitor to the first child page in a structure.
For when you want to create a link to a URL or entry, this fieldtype is here for you. We often see it used in Grids and Replicators.