Templates are pre-populated proposals but without the specifics of a proposal (ie: there's no client name, due date or proposal name). You also can't preview or send templates the way you can with proposals.
Otherwise templates work exactly like proposals - you can create sections, add sections from the library, and add content.
A good way to use templates is to consider which types of projects you pitch the most often. For example, you may often pitch UX design projects and mobile app development projects. In that case, make two templates, one for each project type. Then you can define all the pre-populated content for each, and even share sections that are the same across both templates.
See also Creating or Editing a Template