A really powerful structure I use for my blog. It's better to understand with a diagram so look at the diagram below:
The arrows on the image above represent link juice (backlinks).
This will help you rank well for your main keyword (high competition keyword), all the link juice that goes to any of your pages/posts will also be sent to the main page (homepage) or main keyword.
So to create a silo you need to have a link from your homepage linking to 3 of your main keywords. In the image above those are category 1, 2 and 3. Category 1 must link to page/post 1 and page 1 linking to page 2 then page 2 linking to page 3 and finally page 3 links back to the homepage or main keyword.
Same process with category 2 and 3. Hope I'm not confusing you
But this helps you rank your main keyword which could be highly competitive, that's the benefit. So if you send a link to any of your pages the link juice will also go to the homepage.
Let me use keywords so that you can understand it better, for instance.
Main Keyword could be "Internet Marketing" (main page). Then your categories would be Social Media Marketing (category 1), SEO (category 2), Blogging (category 3).
Then in category one you have page/post 1 which could be Facebook Marketing Tips (post 1), then have Google Plus Marketing (post 2) and finally Twitter Marketing (post 3).
Hope it makes sense, it's always better to see it in action to understand it, but hope that gives you an idea of what a silo is.