The idea of the velocity is to improve the estimations.
A team’s velocity is simply how many stories (or points, depend what you use in the estimation) that team can complete in a standard iteration.
Given a team’s known historical velocity in a given domain (i.e. the average, measured after several iterations), it is possible then to predict how long (how many iterations) it will take them to complete an arbitrary amount of work. It is also a valuable calibration that will help them estimate the next round of stories more accurately.