At heart, all Linux distributions feature the same essential components - the Linux kernel itself, a package manager for maintaining software and a graphical environment. Actually, the latter isn't even that essential particularly if you're installing Linux on a headless server.
The specific combinations of pre-installed applications and initial configurations make one Linux distro differ from another.
While the plethora of distributions might appear confusing to those coming from Microsoft Windows, Linux is Linux. You can write documents, send e-mail, browse the web, run a web server, run a network, or anything else you wish to do on any distribution.
The vast richness of Linux distributions available is actually a strength of the platform. Linux can be tailored to suit any purpose you could have.
That's why you might want to construct your own distribution. Perhaps you know exactly how a good Linux distro should be, and every time you install Linux you set up specific applications and settings. Set your own distro up and bingo, every time you load it onto a new machine it is exactly how you like it.
There are tutorials online how to roll your own Linux distro but here's a new tool which makes it dead simple to base something on the ever-popular Ubuntu.