The best way to understand virt-builder is by looking at typical use cases.
Quick disk image creation from template images
For casual users there is a public repository of CentOS, Debian, and Ubuntu releases. Now you can create a Debian disk image with a single command. By the way, you don't need to be root:
$ virt-builder debian-7
Customization and configuration management
Whammo, you have a Debian 7 disk image. But folks that wish to customize the default image can use command-line options to add & delete files, create directories, install packages, and setup firstboot scripts. This makes virt-builder a great tool for bootstrapping your Puppet/Chef configuration management.
Publishing template images
Heavy duty users will publish their own disk images, maybe a library of images available to hosting customers or a private cloud environment. Not to mention virt-builder is a handy way for development teams to share template images. All this is possible using the cryptographically signed "index file" that catalogues the template images. Users can list and inspect images like this:
$ virt-builder --list centos-6 CentOS 6.5 debian-6 Debian 6 (Squeeze) debian-7 Debian 7 (Wheezy) fedora-18 Fedora® 18 fedora-19 Fedora® 19 fedora-20 Fedora® 20 scientificlinux-6 Scientific Linux 6.4 ubuntu-10.04 Ubuntu 10.04 (Lucid) ubuntu-12.04 Ubuntu 12.04 (Precise) ubuntu-13.10 Ubuntu 13.10 (Saucy) $ virt-builder --notes fedora-20 Fedora 20. This Fedora image contains only unmodified @Core group packages. It is thus very minimal. The kickstart and install script can be found in the libguestfs source tree: builder/website/fedora.sh Fedora and the Infinity design logo are trademarks of Red Hat, Inc. Source and further information is available from http://fedoraproject.org/
virt-builder is a much-needed tool for consuming and publishing template VM images for KVM. It automates a lot of low-level commands normally used to deploy template images. Vagrant and Docker don't need to worry just yet but I think virt-builder is enough to satisfy anyone who is already working with virt-manager, virsh, and friends.
By the way, virt-builder is included in the libguestfs-tools Fedora package.