what is the point of sourcing setup.bash file during installation of ROS

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What does sourcing mean [..]

This is a rather general question. See What is the difference between “source script.sh” and “./script.sh”? on SO and Bash Prompt HOWTO - Bash Programming and Shell Scripts - Sourcing a File for some background.

why are we sourcing setup.bash during installation ?

The Environment Setup section of the installation tutorial gives a hint:

[..] the ROS environment variables are [..] added to your bash session every time a new shell is launched [..]

setup.bash (or .sh or .zsh) sets up your current command interpreter session with the configuration items necessary for ROS to function properly. In other words: it tells bash where the ROS programs and libraries are, tells Python where it can find the rospy libraries, etc.