In this method developer will create portion of solution for demonstration. In demonstration process developers test the functionality and find requirement before proceed to final solution.
Its good way for developer team to confirm they understand problem and requirement and make sure a propose solution will meat customer requirement. In fact this method will produce a temporary solution which will throw away after demonstration (because prototype development should not be used for production).
One of the benefit of this methodology is that developer team can get the feed back from customer before start developing final solution. This method is suitable for web-base application.
Prototypes are used to prove a concept, usually a technical or commercial one. When you are using prototype as a deliverable, you have to have plan for how to use that prototype, how to get feed back, and how to finalize requirement before start developing final solution. prototyping can be a part of design phase.
Prototyping will also help developer team to make decision on fast and effective solution and also find suitable tools for finishing project. Another benefit is you can measure user acceptance. To get maximum benefit from prototype its better to choose the best screens to include in it.