External hard drives are primarily used for storage or back-up of information. Users most often employ an external hard drive by plugging it into a USB port on a computer.
Functionally, external hard drives and USB drives are very similar. Both provide users with storage space. Both can be used to transfer files between devices, and both usually connect to machines via a USB port.
If you need extra storage or back-up memory, the external hard drive is typically going to be the cheaper, faster solution. However, users should avoid using an external hard drive as a file transfer tool. Hard drives are mechanisms with moving parts, making them more fragile than simpler flash drives that don't typically become damaged if dropped or pressed.
Lastly, external hard drives are a good solution for storing and running program files that you would rather not run from your computer's primary hard drive. This is true if privacy among multiple users is a concern. It is also true when dealing with certain files, such as game programs, which may interact unfavorably with the operating system or other programs on your computer. Users find having an external drive available to run those programs convenient.