Your IP address is closely tied to your geographic location, so hiding it effectively prevents observers from figuring out where you are. The VPN server also hides your true location, because any observer monitoring your activities will see the VPN server's IP address and not your own. Because your web traffic appears to be coming from the VPN server, correlating it to you is much more difficult than if you didn't have a VPN. When you use a VPN, advertisers and three-letter agencies will have a harder time tracking you across the web. Even your ISP will be effectively blinded when it comes to monitoring your traffic. If there's someone lurking on your network or, worse, the owner of the access point has configured it to steal information, they won't see a thing. Your web traffic travels through this tunnel, and it exits to the wide-open web from the VPN server to which you are connected. When you switch it on, a VPN creates an encrypted tunnel between your device and a server controlled by the VPN service.
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