For any vector V = (x, y, z), |V| = sqrt(x*x + y*y + z*z) gives the length of the vector.
When we normalize a vector, we actually calculate V/|V| = (x/|V|, y/|V|, z/|V|).
It is easy to see that a normalized vector has length 1. This is because:
| V/|V| | = sqrt((x/|V|)*(x/|V|) + (y/|V|)*(y/|V|) + (z/|V|)*(z/|V|))
= sqrt(x*x + y*y + z*z) / |V|
= |V"https://stackoverflow.com/"V|
= 1
Hence, we can call normalized vectors as unit vectors (i.e. vectors with unit length).
Any vector, when normalized, only changes its magnitude, not its direction. Also, every vector pointing in the same direction, gets normalized to the same vector (since magnitude and direction uniquely define a vector). Hence, unit vectors are extremely useful for providing directions.
Note however, that all the above discussion was for 3 dimensional Cartesian coordinates (x, y, z). But what do we really mean by Cartesian coordinates?
Turns out, to define a vector in 3D space, we need some reference directions. These reference directions are canonically called i, j, k (or i, j, k with little caps on them – referred to as “i cap”, “j cap” and “k cap”). Any vector we think of as V = (x, y, z) can actually then be written as V = xi + yj + zk. (Note: I will no longer call them by caps, I’ll just call them i, j, k). i, j, and k are unit vectors in the X, Y and Z directions and they form a set of mutually orthogonal unit vectors. They are the basis of all Cartesian coordinate geometry.
There are other forms of coordinates (such as Cylindrical and Spherical coordinates), and while their coordinates are not as direct to understand as (x, y, z), they too are composed of a set of 3 mutually orthogonal unit vectors which form the basis into which 3 coordinates are multiplied to produce a vector.
So, the above discussion clearly says that we need unit vectors to define other vectors, but why should you care?
Because sometimes, only the magnitude matters. That’s when you use a “regular” number (something like 4 or 1/3 or 3.141592653 – nope, for all you OCD freaks, I am NOT going to put Pi there – that shall stay a terminating decimal, just because I am evil incarnate). You would not want to thrown in a pesky direction, would you? I mean, does it really make sense to say that I want 4 kilograms of watermelons facing West? Unless you are some crazy fanatic, of course.
Other times, only the direction matters. You just don’t care for the magnitude, or the magnitude just is too large to fathom (something like infinity, only that no one really knows what infinity really is – All Hail The Great Infinite, for He has Infinite Infinities… Sorry, got a bit carried away there). In such cases, we use normalization of vectors. For example, it doesn’t mean anything to say that we have a line facing 4 km North. It makes more sense to say we have a line facing North. So what do you do then? You get rid of the 4 km. You destroy the magnitude. All you have remaining is the North (and Winter is Coming). Do this often enough, and you will have to give a name and notation to what you are doing. You can’t just call it “ignoring the magnitude”. That is too crass. You’re a mathematician, and so you call it “normalization”, and you give it the notation of the “cap” (probably because you wanted to go to a party instead of being stuck with vectors).
BTW, since I mentioned Cartesian coordinates, here’s the obligatory XKCD: 