Managed Vs Unmanaged solutions Dynamics 365

First of all lets understand what is the Solution

In Dynamics 365 solutions are leveraged to transport apps and components from one organization to another or to apply a set of customizations to existing apps. 

A solution can contain one or more apps as well as other components such as site maps, entities, processes, web resources, option sets, and more. 

So basically a solution is a file that you can import in to an environment as an app or to apply a set of customizations to an existing app.

Now lets understand what is Managed and Unmanaged Solution-

Managed Solutions
Managed solutions can modify the system solution components and add new components. If multiple managed solutions are installed, the first one installed is below the managed solution installed later. This means that the second solution installed can customize the one installed before it. When two managed solutions have conflicting definitions, the general rule is “Last one wins." If you uninstall a managed solution, the managed solution below it takes effect. If you uninstall all managed solution, the default behavior defined within the system solution is applied.

Unmanaged Solutions

When you import an unmanaged solution, you add all the components of that solution into your default solution. You can’t delete the components by uninstalling the solution.

When you import an unmanaged solution that contains solution components that you have already customized, your customizations will be overwritten by the customizations in the unmanaged solution. You can’t undo this

Even if you don’t plan on distributing your solution, you might want to create and use an unmanaged solution to have a separate view that only includes those parts of the application that you have customized. Whenever you customize something, just add it to the unmanaged solution that you created.