Port forwarding is a consumer way of hosting a server behind a NAT device like a home router. Most consumer are only giving 1 IP from the ISP, so the outside world can only distinguish this IP while it can not distinguish the host IP behind the NAT router. So when a home user want to serve a game or host a website, most likely they will use port forwarding to tell the router to direct that particular port when it is requested to the correct IP address of the server inside the LAN.
That are also other ways, if you have multiple IP addresses from your ISP, you can use static NAT (1:1 NAT) or dynamic NAT (pool of addresses to be used) or you can simply put the sever in the DMZ exposing it to the Internet giving it a public IP from the ISP.
Port forwarding has no use on a local area network (LAN) simply because there isn't any NAT device and the host's IP are all privately unique. Mostly it is firewall that do the job in the LAN, rather it be a router firewall filtering port or the software on the server, however these port still need to be open if you use a router firewall or any firewall. But it is not the same as port forwarding.
