What is the purpose of the file extension?

What is the purpose of the file extension?
Ganderton Technology Supervisor
The file extension is the three letter file type designation following a period at the end of a file name. It determines what type of file that file will be treated as. Changing a text (.txt) document to .wmv will make the computer treat it as a Windows Media Video file and thus it will be opened with your default program for viewing .wmv format videos.