The inner product between two vectors is the product of length of first vector and the length of projection of second vector on to the first vector.
When I take an outer product its result is a matrix. I understand how to calculate it but I am not able to find out what it represents intuitively and why would it be useful. I have searched about it but have not found some simple explanation of it for myself.
So any easy to understand explanation of it would be much appreciated.
Many thanks!
Right, as you say, the outer product of two vectors looks like a matrix. As such, we should think of what happens when it acts on a vector. What we get out is the left vector in the outer product, scaled by the inner product of the right vector and the new vector. This does have quite a few uses, here's one from quantum mechanics, using bra ket notation (and implying summation by repeated indices)
Let $|\psi \rangle$ be a vector. As such it's an abstract object without a coordinate representation. Now let an orthonormal basis for the space in which this vector lies be
$$\{ | e_i \rangle \}$$.
Importantly, the matrix (again, with a repeated sum implied,
$$| e_i \rangle \langle e_i |$$
is the identity matrix. Then, we can apply it freely to the vector of interest:
$$| e_i \rangle \langle e_i | \psi \rangle$$
The inner product on the right is a complex number, and the vector on the left is an element of our orthonormal basis. Then, we could represent our vector by listing these complex scalars in order, with the understanding that they multiply our basis vectors.
If we decide we don't like our basis vectors, we could choose a new orthonormal basis and change our vector's representation by multiplying by this new resolution of the identity, with its new summed outer product. We would then obtain an object like
$$ | d_j \rangle \langle d_j | e_i \rangle \langle e_i|$$
which now has an outer product between two distinct sets of vectors (albeit with a complex number from the inner product rescaling each one). This could be represented as a matrix with the $i,j$ element given by this inner product, so that the matrix itself is a weighted sum of outer products.
Or here's a simpler example. Let's say we want to rotate a real vector in the plane by a quarter-turn. Then, we should take $(x,y) \rightarrow (y,-x)$, right? One way to write the matrix/linear operator that does this is as
$$|x\rangle \langle y |-|y\rangle \langle x |$$.