Charcoal is a certain kind of half-burnt wood. People use charcoal for fires because it burns hotter and cleaner than wood (less smoky), and more slowly. Your house stays cleaner.
People have been making charcoal since about 4000 BC in both China and West Asia. They did it generally by piling wood up and covering it with dampened dirt, and then lighting the wood on fire, so that it burned very slowly without much oxygen. The best charcoal comes from burning hard wood like oak or beech. The result is mainly carbon, like coal.
Left: a charcoal-burning pile, and right: a cross-section of that pile, showing how the wood is stacked up (from The Knowledge Library, 1919, first printing 1915).
Charcoal burning was usually a specialized job, done by expert charcoal-burners who sold their charcoal to other people. This was a hard and dirty job, and most charcoal burners were very poor, but independent (not slaves). Charcoal-burners appear in a play, the Acharnians, written by the Greek comic playwright Aristophanes.
People needed charcoal to be able to smelt bronze and iron, because you need a hot fire to melt most metals. You also needed charcoal to make glass. People also used charcoal as a cheap drawing and writing material, like a pencil. Egyptian artists used charcoal to make black paint for wall-paintings. Writers mixed powdered charcoal with water to make ink.
If you can make small fires where you live, you could try making charcoal yourself (with an adult), or compare the cooking speed of wood fires and charcoal fires (just buy charcoal briquettes at the store). Or try drawing with charcoal, or making your own ink.