Titles served to many purposes, but basically it describe what you are and what privileges (and responsibilities) you have and such.
- nobility: King or Queen are more "noble" than Prince or Princess, which are more "noble" then ... (sometimes the lower parts was actually more poor, than average citizen, having just the title and maybe sword, but still where "NOBLES", not just plebs)
- land ownership - who owns (and rules) this part of Imperium (be it state, city, or just village)
- special privileges (sorry my English - but those who care of King's horses, serves him at table, hold a key, ...) many times such title could be just honorary and his bearer just formally oversee peoples doing such work
- some was like awards for special deeds and was awarded with some rent (King's Astronome, Achymist ...) or even just one time reward (and honor)
- some was functions like in Army
and when two interests collide, there was rules, who have precedence over who (like place at table, getting better rooms on travels outside city and such)
Anybody with title was "something more" then anybody without any.
Also different titles give its owners different privileges (sometimes as big as to rule all Imperium or as to get executed anybody they was ruling over, sometimes more symbolical as to use some "special" colors or special ornaments in erb, sometimes just practical as to wear two swords or freely travel over land, sometimes just right having be targeted with the title and right to be executed by sword, not by hanging)
Also big village can gain (or not) the right to became "city" get right to brew its own beer freely and such
So it spread even outside nobility and to any larger organized group (be it city representation or thieves' guild or just few drunken friends with special seats in local tavern and titles like "the master of glasses" and "the master or cards" - respected and having mean just inside that community)
For game have good meaning titles inside guilds/fractions/etc which gives the bearer some privileges and rights anywhere in the guild (even so simple as say "member" can ask for help and be allowed to sleep under roof of any other "member", "sparrow" is more then just "member" and can request members to share info or do simple work for him (put an eye on who goes in and out of that tavern) and can request access to guild halls day and night, "eagle" can order "sparrow" and less to some more demanding work and sleep in guild building, if there is one as well as order some special material (say some poison) from guild and get it delivered (at the right price) ... all the way up to the "king of the guild" who have full power over lives of guild members in all cities in whole region and can order assassinations at his whim and without questions)
For game also have good meaning titles given by "official structures" which are usually just something like "medal for honor or extraordinary help" and brings glory and recognition to its bearer as well as some bonuses at negotiation with people, sometimes better prices or free pint of bear for local hero and such - more for statutary and role playing, than dungeon-crawling-wise, but many times the character AND the player is rather known as "Gothreg - the Blue Lion of WoodTown" local hero, who save the town from unimaginable terror and is subject of local ballads, then just get reward of 10.000 GP and still be just some "Gothreg or how he call himself" ...
Because just the Pride and its recognition in form of Title may mean more for some persons. And local authorities can offer it for cheaper, than 10.000GP in unmarked precious gems.