The lists tool allows you to create two different types of lists—smart and static. These two types of lists are useful in different situations because of their unique functionality.
Smart lists are dynamic, meaning that they constantly update. New contacts who meet the criteria will join the list even after the list has been created for the first time. So, for example, a smart list would be valuable when you have an email campaign to a particular subset of your contacts running over time, and always want the list to update with new contacts who meet the criteria. You may also use a smart list for reporting purposes. For example, you can keep track of the current number of contacts to date who filled out a particular form.
Static lists do not update as new contacts meet the criteria. Instead, they are a snapshot of a group of contacts who meet a certain set of requirements at a certain time. Contacts can be manually added and removed from static lists. A static list can be helpful to gain an understanding of contacts who met a certain criteria on a particular date. Then you will have the ability to look back at that static list later and see contacts who may no longer qualify for the criteria. A smart list, on the other hand, would always display the most updated information regarding which contacts do/do not meet the criteria.
Read about some common uses for each type of list here.