Clarification on Diagonalization

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I don't understand the diagonalization $A = P^{-1}DP.$

Doesn't that just mean that $A = D$ since $P$ times its inverse is $I?$

What make this useful?

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This tell you that the linear map represented by the matrices are the same, although the matrices are different. They are different because matrix product is not commutative, so you can not simplify. $P$ is the matrix that let you change the basis of the vector space in which you are.

A diagonal matrix represent a stretch in every direction of the basis. The point is that when you can diagonalize a matrix this way, you are saying that you only have to perform a little change in your point of view and then you find that the linear map is only a "change of scale" in every main direction.

That is to say: the meaning of $A=P^{-1} D P$ is that you can think of this linear transformation as a basis change, followed by a stretch by a possibly diferent amount in every axis, and returning back to your original basis.