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It's a virtual model of anything that exists in the real world. The simplest example is a VR model based on a real-world place: whether it's a reconstructed city in the game Cities Skylines, or the Nürburgring track in someone's favourite racing game. Digital Twins don't need to stop at VR though. They can also be created to help understand more nebulous concepts such as processes or systems.
By being able to simulate a complex system in software, you can run if-then scenarios, better manage risk, optimize the system, and understand the data that the real-world system generates.
NASA developed the concept based on the issues they had with the Apollo 13 mission. How do you operate, maintain, and diagnose systems that are too distant for you to physically interact with? NASA engineers had a really great understanding of the systems operating on the shuttle, allowing them to troubleshoot problems and return the crew safely.
There are certain things that quantum computers will do much better than classical computers. Simulating natural systems, like chemistry, and also non-linear dynamics that wind farms are dependent on to produce power. Finally, there are certain classically hard optimization problems that often appear in supply chains that can be efficiently solved with quantum computers.
To quote the late Richard Feynman: Nature isn't classical, dammit, and if you want to make a simulation of nature, you'd better make it quantum mechanical, and by golly it's a wonderful problem, because it doesn't look so easy.
