Capacity can be considered as a multiplier for Workday Length. It is used in the yellow area in the Overview-graph which, in simple terms, answers to question: "How would the situation look if this person had only x percent of their capacity".

Capacity can be used to indicate the amount of billable work for a person or maybe even predict the "real capacity" of a person - during a workday nobody works 100% of the times, as a workday includes breaks, travel times etc.

By using capacity and looking at the Allocations Graph's  value Scaled Capacity you can get a deeper glimpse about the true workforce you have in hand.