It's been several years since Apple added the option to store digital versions of your personal identification on iPhone and Apple Watch. This can be useful in several ways, such as helping you zip through airport security checkpoints. Along with adding a state ID or passport to Apple Wallet, there's also the option to create a digital version of your driver's license.
Having a digital driver's license means you won't necessarily need to reach into your pocket, dig out your wallet and present your physical card when you need to prove your identity or age. Some businesses and venues (such as bars and restaurants) support these digital IDs, though this isn't consistent or widespread yet.
Beyond the convenience factor, there's a security consideration here too. Your digital driver's license is encrypted and stored securely on your device. Apple says neither it nor the issuing authority can see where or when you share your digital ID.
Before you present your digital ID for someone to scan, you'll be able to see which data they'll have access to. For instance, if a bartender scans your digital ID, they might only see confirmation you're over 21 and that you have a matching photo. Your info is only shared after you authenticate using Touch ID or Face ID.