Suppose you want to read a book, which costs Rs.1000/-. However, you do not have Rs.1000/- to spare for that book. The best alternative you can resort to, other than obviously borrowing it from somebody, is to make a group of friends who are interested in reading that same book. Then, the group can contribute some amount each and purchase the book, which you can read it in turn. Thus, you are able to get the benefits out of the book and that too by paying only a part of the price. Moreover, the book would always remain with you unlike the case if you had borrowed it from someone.
This same logic goes into investing in a mutual fund, where small amounts from large investors are pooled together to create a diversified portfolio of assets for "mutual" benefits of all investors.