There is enough information on how to implement base32 encoding or the specification of base32 encoding but I don't understand what it is, why we need it and where are the primary applications. Can someone please explain and give nice real life scenarios on usage? Thanks.
Like any other "ASCII-only" encoding, base32's primary purpose is to make sure that the data it encodes will survive transportation through systems or protocols which have special restrictions on the range of characters they will accept and emerge unmodified.
For example, b32-encoded data can be passed to a system that accepts single-byte character input, or UTF-8 encoded string input, or appended to a URL, or added to HTML content, without being mangled or resulting in an invalid form. Base64 (which is much more common) is used for the exact same reasons.
The main advantage of b32 over b64 is that it is much more human-readable. That's not much of an advantage because the data will typically be processed by computers, hence the relative rarity of b32 versus b64 (which is more efficient space-wise).
Update: there's the same question asked about Base64 here: What is base 64 encoding used for?