If you are familiar with crowdfunding then ICO's will make sense to you. Before launching an ICO, the startup company usually comes up with a whitepaper where they detail about the company idea, project roadmap and the intent for token distribution. To win the confidence of its investors, whitepaper also share details why token is needed for the project and Token Distribution Plan (TDP). TDP usually share details about how many tokens will be allocated to company, founders, developers, investors, marketing or to cover any other costs. TDP also provides good insight whether founders have long term plan for the project or just interested in quick buck.
Some ICO companies also offer pre-sale tokens to institutional and high worth investors at a much discounted price, before ICO is opened for the general public sale. Generally, tokens offered during public sale event are much cheaper and offered at discounted prices compared to buying token once its listed on an exchange. Maximum token discounts are offered in the beginning of ICO launch, which sometimes decreases as time progresses. Passionate supporters and investors buy new ICO tokens in the hope that if company idea is implemented and successful, token value will multiply and provide a handsome return of investment. Finally, when the funding goal for a project is met and the project takes off, these tokens becomes functional units of cryptocurrency.
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https://www.bloqtimes.com/what-are-icos/