A domain name is the equivalent of an address for people to use to find your site. Servers and systems all use the IP address to find your website but just imagine if your audience had to remember 220.127.116.11/~hypnoth. This is why we have domain names as they are more memorable for us mere mortals.
We always advise our customers to think about what they want to achieve with their website and buy as many domains as they may need. If it is a personal or family site where you don't expect to attract customers or unwanted visitors then you can have any domain name you wish (provided it is still available). For business, commercial or community sites where you are trying to attract an audience you need to consider some extra points before buying your domain names.
It is worth noting that a company name and a related brand name may not always be known to your surfing audience. Here in the UK we have chocolates called 'Revels' but do you know which company owns that brand? So if you rely on using a single website for your company you may miss some of your target audience.
Search engines index billions of web pages and they use a lot of different techniques to rank those pages. Most of us would like our site to appear on the front page of Google, Yahoo, MSN etc. but those positions are based on the most appropriate sites that match the search term entered. The domain name also plays a part in this process as it can help to bring you nearer to the top of search terms.
Two companies sell identical products - camping accessories. The first company has been established for 50 years and is called Johnsons (www.johnsons-camping.com). The second company is much younger, just 5 years trading and their company name is Kingston but their website domain is www.camping-accessories.com
Both sites have the same products, keywords, content, and incoming links. If a camping novice were to go looking for products and had no preference for supplier at this stage, it is likely that they might enter 'camping accessories' as a search term. Which of the two sites do you think is likely to rank highest? With all things being equal the search engines will prioritise the domain name as extra reasoning for a higher ranking.
Surprisingly enough there are many people who never consider mis-spelled names - Jane or Jayne? Accommodation or Accomodation? Can your domain name be mispelled? If it can then people will make that mistake. It is always worth buying every derivation of your domain as this secures the name. Some people would not think twice about creating a website that looks similar to yours and capture business form a mis-spelled name or even a TLD that you failed to buy. Many people will buy the .com or .co.uk but not both as they feel it is wasted money. It isn't rocket science - £8.00 a year for each extra domain name or risk someone else stealing your customers.