Put more simply, this is a laboratory produced restoration, with increased strength and durability, as well as improved esthetics and wears properties.
So what are the advantages? Unlike Mercury (amalgam) fillings which expand and exert damaging forces to the remaining tooth structure, and unlike composite fillings which when placed in larger cavities experience shrinkage that cause it to fail, inlays and onlays do not undergo expansion or contraction. Also, because they are produced by the laboratory, you can be assured of a more accurate fit and greatly enhanced cosmetics.
Why not place a crown? Though crowns are necessary in certain situations, it has been proven that preserving as much natural tooth structure as possible is ideal. Thus in appropriate situations, an inlay and Onlay is always more desirable than a crown.