When should I include a canonical link tag?

I was reading that a canonical link element is the most important thing in seo. I tried to look up what it is and the logic seems straight forward as far as terms like

the preferred location of this url (the “canonical” location, in search engine speak) is http://example.com/page.html instead of http://www.example.com/page.html?sid=asdf314159265 .

but what does a preferred location mean? If i'm going to example.com/page.html instead of example.com/page.html?side=asdf314159265 then aren't I going to the wrong website? What if my website only has the pages

https://example.com
https://example.com/about.html
https://example.com/contact.html

Do I create a canonical link tag for each of these webpages? Would each one just be the exact same url name?