An entity is a grouping of things with rules or data in common. An entity often represents a group of people (eg children, applicants, stakeholders) but it can also represent a group of objects (eg textbooks), activities (eg assignments) or concepts (eg school terms).
Entities may be used to allow the same rule to be applied multiple times to make a determination. For example, you may have a rule to say that if any child of the applicant is of school age then the applicant is eligible for a tax rebate. You may collect the details of each of the person's children in order to infer whether each child is of school age, and from that infer whether or not the person is eligible.