What keyword match types mean
A keyword is not what the user types. It is the term an advertiser adds to an ad group to tell Google Ads what it wants to compete for. What the user types is called a search term, and it almost never matches the keyword letter for letter. The match type is the rule that joins the two: it defines how much distance the system allows between the real search and the keyword you bought.
It helps to separate it from other settings it gets confused with. It does not change the ad text, it does not alter the bid and it does not decide position. It only delimits the set of eligible searches. Inside that set, the auction still rules.
The current system has three options. Until 2021 there was a fourth, the broad match modifier, written with a plus sign in front of every required word. Google retired it that year and moved its behaviour into phrase match. Anyone who learned to target with that modifier now works under different rules, even though the interface looks similar.
The other change is conceptual. All three options stopped comparing strings of text and started comparing meanings. Even exact match, which sounds literal by name, covers searches with the same intent even when the words change.