Prototyping can be seen as a distillation of a single design element, which is pronounced, in a prototype, as others are kept to the side.
These can be used to further inspiration, to communicate to others in a working group, to user test, secure funding etc.
Here in lies one danger, that if one shows a working prototype to an external participant, it has to be clear, which element of the design is being tested, else all the feedback one gets might be for an unrelated part.
The process is not only to develop concepts and create prototypes as representations, but to integrate inspirations born from the creation of prototypes. This can happen throughout the design process, testing components by oneself or by users, preferably already early on, as soon as one can show a minimal viable interaction one can infer whether ones concept is engaging. This can take shape for instance using physical computing, not as a computer per se but as a bridge between conception and the physical world, or using proofs of concepts, for instance narratives or videos.
Prototypes can vary especially concerning their resolution and feedback time. Next to making sure one is testing the right thing, one has to differentiate between testing and convincing people. Looking further, we can use prototyping to look at sustainibility, costs, safety or similar notions, and at some point one has to evaluate whether one is comfortable to procede to executing an idea, or if one stays in the potentially self sufficient cycle of prototyping.