MVP stands for Minimum Viable Product. If you wish to setup a website that is going to do something, as you pore over the things that the site can do, you will certainly think up a hundred things. Obviously it is not possible to implement all of these in the first version. It is also ill-advised to do all of them in the first version since that would lead to a great deal of confusion in the minds of the user. Besides, a great deal of education would be required to use the site to its full potential.
Teaching your customer how to use your product is much like teaching a child how to play a sport, let us assume tennis. The first this that you are going to teach is hand eye co-ordination so that the kid can hit the ball consistently and then you will introduce the net and then the court with all of the constraints and rules.
It is much the same when you build a product. It happens quite naturally when the product is a game, take any game as an example. Level 1 is easy and then the complexity rises. It is a lot harder to think of products in this manner where it starts from something simple and then you add layers on top.
Starting with the bare minimum features means that you create a product that has a single point focus and the application can be very easily understood.
If I gave you a cycle and asked you to figure out how the application of effort on the pedal leads to the rotation of the wheel
Gave you a car and asked you to figure how the movement of the piston leads to the rotation of the wheel;
which might you figure more easily?
The MVP is about dialling down the complexity and hence the investment needed to get your business kick started.
Even a Facebook page can be an MVP if you can attract enough people to it and get them to transact through it. I know so many small startups selling their goods through just a Facebook page. No website, no payment gateways, no fuss, simple. If they see good traction, they can move on to building an entire website.
Nastygal.com is a multi-million dollar business. It started as a channel on Amazon which served highly curated and unique products. When they saw that they had an invested and loyal customer base, they moved to build their own website.
Every business is based on an insight on human behaviour. The job of the MVP is to establish and validate the behaviour. If what you expect is what is happening then you can build out the entire product/service that you have envisioned.
The purpose of an MVP is to get the idea across in its simplest form, see how many people are interested and if the kind of behaviour that you seek can be encouraged.
Since most of my examples are to do with websites does not necessarily mean that this is not possible when it comes to hardware or other kinds of businesses. The first version on most products are quite basic. Obviously if the product is a tangible object, it is important to make it. Hacks such as Facebook pages may not work. Nevertheless it does not have to be a complicated and costly product straight out the door as illustrated effectively in the image above.