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Every open-source project should have one. A LICENSE file (sometimes LICENSE.md, LICENSE.txt, or COPYING) sits at the root of a repository and contains the legal text granting permission to use the code. Without one, the code is technically all-rights-reserved by default — even if it's published on GitHub, no one is legally allowed to use it. The LICENSE file is what turns "public code" into "open-source code".
The popular permissive licenses (MIT, Apache 2.0, BSD, ISC) all let users do basically anything with the code — use it commercially, modify it, redistribute it — as long as they include the original license and copyright notice. The copyleft licenses (GPL, AGPL, LGPL) add a requirement that derivative works must also be open-source under the same license. Choosing the right one depends on what you want to encourage: permissive licenses maximise adoption; copyleft licenses ensure improvements stay public. choosealicense.com is a useful guide.
GitHub detects LICENSE files and displays the license name on the repo page. The detection is filename-based — `LICENSE`, `LICENCE`, `LICENSE.md`, `LICENSE.txt`, and `COPYING` all work; anything more creative might not be recognised. The contents need to match a known license template (MIT, Apache 2.0, etc.) for GitHub to identify which license applies. Don't write your own legalese unless you have a lawyer — use a known template, fill in the year and copyright holder, and commit it to the repo.