Want to install a custom Android ROM — in other words, a third-party version of the Android operating system — like CyanogenMod, AOSP, etc.. You’ll probably be instructed to install a custom recovery too because it is very needed an infact it is a must to have it installed because without it, flashing of custom roms, making proper Nandroid backups of your device stock firmware will be impossible.
Although all Android devices are shipped with a recovery environment preinstalled. This recovery software can be used to restore the device to factory default settings, update its operating system, and perform other diagnostic tasks but not as powerfull as a custom recover environment.
Android devices come with Google’s recovery environment, which is often referred to as the “stock recovery.” You can boot to the recovery system by pressing device-specific buttons as your phone or tablet boots or by issuing an adb command that boots your device to recovery mode. The recovery menu provides options to help recover your device — for example, you can reset your device to its factory default state from here. The recovery mode can also be used to flash OTA update.zip files. If you want to flash a new ROM to your device — or re-flash the factory default ROM file — you’ll need to boot to recovery mode first.
DIFFERENCE BETWEEN STOCK RECOVERY & CUSTOM RECOVERY
STOCK RECOVERY: The stock recovery is a minimal, limited system. It’s designed to be ignored, and it can generally only flash OTA updates and ROMs provided by the device’s manufacturer, not any third-party ROMs.
CUSTOM RECOVERY: A custom recovery is a third-party recovery environment. Flashing this recovery environment onto your device replaces the default, stock recovery environment with a third-party, customized recovery environment. This is a bit like flashing a custom ROM like CyanogenMod, etc. — but, instead of replacing your device’s Android operating system, it replaces the stock recovery environment.
A custom recovery environment will do the same things as the stock Android recovery. However, it will also have additional features. Custom recoveries often have the ability to create entire device backups and also have ability to restore backups when needed. Custom recoveries allow you to install custom ROMs, Flashable zip files, etc..
POPULAR CUSTOM RECOVERIESCWM and TWRP are the two most popular custom recoveries, but other custom recoveries may be available for some devices.
ClockworkMod Recovery (CWM) can create and restore NANDroid backups — backups of an Android device’s entire file system. ClockworkMod offers a ROM manager with a file browser that allows you to easily browse for and install custom ROMs via ClockworkMod Recovery and manage and restore backups. It also has other advanced features that will be useful if you’re installing and dealing with custom ROMs.
Team Win Recovery Project (TWRP) is a touch-based recovery environment. Unlike other recovery environments — including Android’s default stock recovery, which needs to be controlled with the device’s volume and power buttons — this recovery environment has a touch-based interface you can use by tapping your fingers on on-screen buttons. TWRP even supports themes. Like CWM, TWRP offers ROM installation and backup features the stock recovery environment doesn’t.
WHEN AND WHY TO INSTALL CUSTOM RECOVERYThese custom recovery environments are most useful when you’re installing custom ROMS or flashable zip files on your device, as they provide backup/ restore, and ROM-flashing features you’ll need. Additionally, you don't have to wait until when custom recovery is needed before you install it.
My recommendation is that "When you buy an Android smartphone, endeavour to install custom recovery meant for your device on it and make entire Nandroid backup of your smartphone". It might come in handy when your device unfortunately gets bricked.