I know how to jail break but my question is what jail break actually does?

What restrictions it remove and why Apple did not do it in the first place?

No one can accurately say why Apple locks down the ability to install any software from any source on iOS devices, however it does let them control the user experience on the device - which is important to them.

It's part of the look and feel argument and certainly a locked down device gives them that kind of control.

-t