My understanding is that it accomplishes the same thing but for every device on your network rather than having to manage host files on each device. It also works for those where editing the host file isn't possible.

It's also good for systems with hard coded domains that ignore hosts files.

Windows will still connect to quite a few even if they are in the hosts file.

A DNS server can't help with that. You'd need a firewall.

Not much, except it's on another machine and is a central point of config. Can even be used to hand out DHCP

Mobile phones. You can't modify the hosts file on an Android phone without rooting the phone. I'm not even sure how you would do it on an iPhone.

Both of them, however, allow you to manually specify the IP of a DNS server in advanced network settings.

Privacy and ad blocking for whole network instead of just one device and you can also add your own custom dns servers for extra privacy.

For ex: Pihole + Unbound

Works for devices with hard to access hosts files (IoT garbage, smart TVs)

It looks like pihole supports wildcards better maybe