You're right. Your ISP can't see the content of your communication with YouTube. But they can still see that you're communicating with YouTube (or your favorite porn site). And YouTube (or your favorite porn site) can see which IP address you're connecting from.
With a VPN, your ISP can only see that you're connecting to the VPN. And YouTube (or whatever site you're visiting) sees the connection coming from the VPN, not from your IP address. So if you want to watch stuff on Netflix that's not available in your country, you can just choose a VPN endpoint in a different country, and Netflix thinks you're in that country. Or if you want to download pictures of
great tits, you can do so without worrying about your ISP telling your mom.