I am asking for a very simple "dumbed-down" answer for a newbie.
Using Adobe Acrobat I can create a self-signed certificate and sign a document as anybody. I can use anyone's name and anyone's signature image.
So what's the point? If I can sign as anyone, what value does this add to the document. Does it prove anything?
Self-signing a document is not meant to prove that you are you or that you wrote it. It provides a way for you and the recipient to be assured that you are using the same file.
In order for this to work, yes, there needs to be some sort of agreement between the parties that they are talking to who they think they are talking to, but assuming that is established, then the parties know that the file is the same.
Have you seen file downloads where they list the MD5 hash of the file? Same idea. By comparing the signature to the trusted, known source reference (the hash, or in this case, the digital cert) the recipient can be assured. For a file, where the source might ultimately not be known, by including a name, then anyone who receives the file knows who to contact to check on its authenticity.