Lets consider an example:

I would want to create a new VPC and a subnet

I want to provision a ELB, ASG with 5 EC2 instances & RDS database

I would want to setup the right security groups

AND I would want to create 4 environments

Dev, QA, Stage and Production!

CloudFormation can help you do all these with a simple

(actually NOT so simple) script!

Advantages (Infrastructure as Code - IAC & CloudFormation) :

Automate deployment of AWS resources in a controlled, predictable way

Avoid mistakes with manual configuration

Think of it as version control for your environments