Every file in computers has an extension, usually 3 or more characters suffixed to the file name. Some unexpected file extensions are harmful for the computer and pose a security risk. Some file extensions are used to spread viruses. There are a huge number of file types available today.
Making your pc show file extensions is better as it helps in prevention of spreading of malicious software. Common file extensions include .doc, .txt, .xml, .dat, .gif, .jpg, .png, .pdf, .mp3, .wma, .mp4, .vob, .mpg, .htm, .xhtml, .html, .sys, and many others.

File extensions also help in determining if the type of the file being viewed is an audios videos or data file as different type of contents have different extensions. You require different programs or software to open different types of files. So it is important to know extension of a file to clearly determine w what type of program is required to open it.