Thank you for your reply, @aptalca! Workspaces are, at least in my opinion, one of the most useful features in VSCode. You can save individual settings per workspace, based on the project's needs. They are also not limited to the existing folder structure, instead you can add folders outside the working folder to your workspace. For example I have common tools that I use in all of my Nextcloud apps, and I can add this folder in all of my app workspaces, so the tools stay up-to-date every time I update them. There are surely more features to them, but these are the most useful ones to me personally. A workspace file is just a file containing the configuration of your workspace, saved as a .code-workspace file on the disk.
I think workspaces would be more useful if you mostly work on multiple projects alone or mostly maintain them yourself. If you just clone an individual repo to work on an issue and after that want to clear the desk for the next thing on your list, I don't think you would benefit from using workspaces. Currently it's a bit confusing, as the app's menu's contain options such as "Open Worspace" and "Save Workspace As", but the functionality is missing.
Here are a couple of topics explaining VS Code workspaces:
https://code.visualstudio.com/docs/editor/multi-root-workspaces (official documentation)
https://stackoverflow.com/questions/44629890/what-is-a-workspace-in-vs-code (discussion on the subject on StackOverflow)