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What exactly is this base?

As said in the readme, it's an entity base that has prediction enabled for player-based usage. What that means is that, like a weapon, a player can use this entity under any lag condition.

But why? I never noticed the difference

If you've ever played on a server with items such as a jetpack, you've noticed that when activating the item, your view will spaz out or you will feel like you've teleported, that is not a smooth experience.

So, if I read your prediction page on the wiki correctly, why do I need an entity base for this?

As funny as that sounds, cleanliness mostly, you don't want hooks dangling around globally for each player, saving variables inside of the player object, and etc. Plus, this entity base was coded mainly for entities that can change owners and keep their variables intact, just like a weapon, but in pickup form.

Ok cool, how do I make one?

Head over to Creating a predicted entity