These distinctions are important because each have their own uses (although I mainly use inline and external as you'll see).
Literally "in" "line"
This is an HTML-only paragraph.
This paragraph has some inline CSS using the "style" attribute! Notice how the "style" attribute (aka the CSS) is literally "in" the "line" with the HTML?
This is useful for changes that are specific to a piece of HTML. For example, I wanted the previous paragraph to look the way it does, and I want this one to also look unique instead of the basic black Time New Roman seen in every other paragraph.
But what if... you want EVERY paragraph to purple and in a specific font instead of black Times New Roman? That's where internal CSS comes in!