Payees are one of the transaction properties that you can create, modify and delete. They are used to denote the merchant/institution/person participating in the transaction. So if you make a purchase at Whole Foods, you'd enter the payee as "Whole Foods" each time you buy something there. This would allow you to later generate a report to see how much you've spent in total in that shop (or combine it with other transaction properties, such as categories, to generate even more meaningful reports).
Please note that for simplicity, we are calling this transaction property Payee both for expenses and incomes. However, in both of those cases, you should use the Payee to denote the other party: the one you're paying to for expenses and the one that's paying you in incomes.