At registration or when the admin manually inserts a user EVERY user must be attached to a user group. In many possible configurations of the software there can be multiple user groups to manage abilities, privileges and/or pricing for different sets of users. So when a user registers they must be placed within one of those user groups. So in many client configurations they wish all users to go into one user group. In other scenarios clients allow their new registrants to choose a user group in their registration process. In either of those there must be a default user group that users are placed into. The default user group feature allows the admin tool choose which user group that default user group will be. If you go to the following admin tool:

USERS / USER GROUPS > USER GROUPS HOME

You'll see an admin tool like you see below:

The above screenshot shows the basic way to set the site wide default user group that all new registrants will be added to within the registration process. You'll see in the "default" column you can choose a dropdown and set "all" next to the user group you wish all registrants would get placed in by default.

Note the above will happen if you as the admin do not allow the new registrant to choose their user group at registration. Also note there are "opt out" options within the registration process where the new registrant does not choose a user group in those situations. When that happens those users are placed in the default user group set above.