What does the 'modifyEntrySources' hook do? What does the modifyEntrySources hook do exactly, and when might one use it? Can someone help clarify this please?
"Source" is in the context of "where an element is pulling its data from".

The easiest example is with Assets, because they have easily defined Asset Sources settings portion of the control panel, but all elements (entries, tags, categories, users, etc.) have sources behind the scenes.

See the CategorySources plugin for an example of how it might be used (including a screenshot).