My buddy Jack went to Mike Cohn's Product Owner Certification class. He returned with this great analogy providing the context for "point" estimation and "hour" estimation.
If 2 runners of varying skill are asked to estimate the task of running a fixed distance; the faster runner might say, "that looks like a 15 minute run," where as a lesser runner might say, "no, that's a 30 minute run."
In making disparate time estimates (of the same task) the runners have demonstrated the value of point estimation. Ask the runners to measure the task in terms of points (lets say 1 point equals 1 mile). Now the runners can agree "Yes, that looks like about 2 points." Using points they reach consensus and provide the PO with a sufficiently high level estimate to assist in prioritization and pre-planning.
However, when it comes to sprint planning, start moving from points to hours (this is new from Mike). Like in the case of our runners, the hour estimate is useful in helping the team plan thier work for the sprint. If one runner is faster than another this may help the team members to adopt the tasks they best suited for.
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