To know the capacity of a team for a particular iteration is important to determine how much load it can do for that particular iteration. This is measured in ‘Points’ — a unit-less form of measurement of the team’s effort to complete a story.
Match the team’s load against its capacity to see what’s feasible and what’s not feasible to do. Don’t overload … load just enough then pull in more work accordingly.
As always, the business provides roadmap for forecasting purposes… but only the team can commit to what they can do (bearing in mind their load vis-a-vis their capacity).
Ignoring the need to balance capacity and load is disastrous… even hilarious.