Rooms act as Wifi hotspots of sorts. they allow you to actually connect to other people.

You connect to a room and announce your identity there. it returns you a peer list of everyone else connected to that room, you then choose who you want to connect to.

Need to connect to a room (or find someone else on the same physical Wifi Hotspot with you) before you can actually connect to other people over the internet.

More info about rooms here