Hi Neehal,
The model is the basis for all planning functions in SAP APO -it contains all master data i.e. locations, transportation lanes, products, resources, and production process models.
Master data from ECC system is automatically assigned to the active model (model 000) during the transfer to APO. The active model represents the supply chain actually used in the company. In this way, all the transferred master data is automatically available for operational planning in model 000. You must assign master data that you create manually in SAP APO to a model.
For more information - refer to below links -
Model and Version Management - Supply Chain Management (SCM) - SCN Wiki
Supply Chain Model, Planning Version, and Supply Chain Engineer - SAP Library
Hope it helps.
Regards,
Alok