A product portfolio is a collection of products that you can show to a person or company. In this way, a company can decide which products to support in the hopes of becoming more profitable.
As to why innovations are important, there are several reasons for this. First, we live in a fast moving world, especially in the area of technology. What people want within this cultural matrix is innovation. They want faster gadgets and smaller gadgets at a better prices. The hunger of the consumer in part drives the innovative push.
Second, if companies are going to be profitable, then there must be innovation not only to meet the needs of the public, but also to stay competitive with other companies that are restless with innovations. For example, the battle between Samsung and Apple is fierce.
Finally, true innovations can redefine the way we live. It can create a new market. Many companies want to be the ones that do this.