Understanding how and why changes occur and how these lead to the realization of impact goals, helps determine what activities will be needed to make this happen and what investment is needed to do so.
A theory of change makes explicit the intermediate changes necessary to realize your impact goal. It should always be actor-centered: who needs to change in which way? Changes can be in knowledge, attitudes, behaviors, relationships, …
A theory of change goes beyond your own organization. It looks at the whole system and all actors in it. In this way it takes into account system thinking and complexity.
For those who really want to dive into the theory of change, we can advise you two very good reference documents: