What are the purpose of stories?
There are a number of reasons why stories have been told over thousands of years, and in different formats and styles. Story-telling has been around virtually since the dawn of man. Cave drawings intended to describe events represent the earliest known instances of such communications, although such efforts are believed to have been intended primarily to report events that actually occurred. Over time, however, storytelling evolved to include the conveyance of information, both fiction and nonfiction, through oral means, through paintings, music, dance, and through use of the written word. Why individuals thousands of years ago -- and it is believed that Homer wrote his epics The Odyssey and The Iliad as far back as 800 B.C. (or, B.C.E.) -- decided to conjure up fictional tales and present them in myriad forms, including through plays, narratives, fairy tales, musical lyrics, and other means will never be known. What was the purpose in writing or telling stories? We really don't know. What we do know, however, is that storytelling developed and evolved at least in part to help explain natural phenomenon that mystified earlier civilizations. No where is this truer than in the development of mythology, especially by the ancient Greeks, who explained celestial observations through reference to theology. Formations or constellations of stars were said to depict events and individuals, including gods and goddesses, that helped societies better "understand" the universe.
Storytelling likely also came into existence as a way of explaining conduct or events that the storyteller hoped would divert attention away from conclusions that would prove deleterious to the storyteller in the event the truth were discovered. In other words, lying was an early progenitor of storytelling. Storytelling also evolved from a natural inclination of human beings to seek entertainment. Plays and fictional stories have been around, as noted, for thousands of years. Aeschylus was writing plays depicting accounts of historical events around 500 B.C.. Why did he decided to depict events in a theatrical format? Only Aeschylus can answer that question. All we know is that individuals were engaging in storytelling activities thousands of years ago.
If one has to identify the main purpose of storytelling, the inherent need to depict and explain events remains the most important. Not unlike contemporary conspiracy theories that seek to explain events around the world in a way more palatable to individuals or more consistent with many individuals' predispositions to view skeptically "official" or commonly-accepted explanations, storytelling in earlier eras almost certainly evolved as a way of understanding the unexplainable. Storytelling also no doubt evolved as a means of ensuring important events and individuals would be remembered. Tacitus and Herodotus lacked the tools enjoyed by later generations of historians. Filling in the blanks in what "facts" they were able to attain invariably involved some level of supposition. The link from that to fabrication, whether intended to entertain with no pretense of accuracy or intended to manipulate public sentiments through subterfuge was short, and enduring.