The purpose of a domain name in web hosting is to provide a human-readable address for users to access websites. The domain name serves as a unique identifier that is easier to remember compared to an IP address. It translates to a specific IP address through the Domain Name System (DNS), allowing users to navigate the internet seamlessly. Domain names enhance online branding and credibility, making them an essential aspect of any website as they contribute to its visibility, marketing, and overall user experience.