Prototyping a concept makes it easier for project teams to grasp. Having something tangible to examine at an early stage facilitates discussion and reveals potential flaws or modifications at a time when they can be addressed at relatively low cost.
Early in a project, when ideas are being tested, it's most appropriate to have very simple prototypes - sketches and flow diagrams that can be quickly modified as the project scope is fleshed out.
As the scope becomes clearer a more functional prototype, that enables interactions to be simulated, is useful in getting a feel for how the system will work in real life. These functional prototypes are useful for user testing, to find out whether end users can use the system effectively.
When adding functionality to existing systems, or when the combination of graphic design and interactions needs to be assessed, a high resolution, highly interactive prototype that accurately mimics the look and feel of the proposed system can be extremely useful.