The hosts parameter is used to define the hosts a play in a playbook will run against. Let's say your default hosts file or your own inventory file contain the following.

web:
  hosts:
    www1.example.com
    www2.example.com
db:
  hosts:
    db1.example.com
    db2.example.com

In this example, hosts: all is used. This will touch (create) the /tmp/foo.txt file on every hosts in your inventory.

---
- hosts: all
  tasks:
  - name: touch /tmp/foo.txt
    file:
      path: /tmp/foo.txt
      state: touch
...

In this example, hosts: web is used. This will create the /tmp/foo.txt file on only the web hosts in your invetory (www1.example.com and www2.example.com).

---
- hosts: web
  tasks:
  - name: touch /tmp/foo.txt
    file:
      path: /tmp/foo.txt
      state: touch
...

A playbook can contain multiple plays. In this example, /tmp/foo.txt will be created on the web hosts and /tmp/bar.txt will be created on the db hosts.

---
- hosts: web
  tasks:
  - name: touch /tmp/foo.txt
    file:
      path: /tmp/foo.txt
      state: touch

- hosts: db
  tasks:
  - name: touch /tmp/bar.txt
    file:
      path: /tmp/bar.txt
      state: touch
...