When you subscribe to a new feed it comes with (sometimes long) history of old episodes. Often you are only interested in the last couple of episodes as older episodes are usually already out of date. In this case it is very convenient to be able to hide all (or some) of the old episodes to reduce clutter.
This is where marking episode as "Read" comes handy. You can mark any episode that you don't care anymore as "read" (by tapping on the "blue dot"). Once you marked unwanted episodes as "read", you can can be easily "hide" them by using the "Unread Only" episode filter (the "eye" button located in the bottom left). You can also mark all episodes in the feed as "read" using the "Mark All Read" button in the bottom right.