Why derived data types?

A derived type is a data structure which is defined by the programmer:

Equivalent to structs in C programming language (or matlab)
Consists of other data types - including other derived types

We usually define new data type to encapsulate your data and hide its representation:

A well structured and readable program should try to express its variables as objects
Variables used in the same context should be grouped together - this makes the program flow easier to understand and less probe to errors (less arguments for subroutines/functions)
Derived data types is a feature which allows programmer to make object grouping possible

Declaration and visibility

For instance

 type pgmImage
    character(len=2)     :: magics
	character(len=255)   :: createdby
	integer              :: nx, ny
	integer              :: maxValue
	integer, allocatable :: image(:,:)
 end type pgmImage

And to declare a variable of type pgmImage:

TYPE(pgmImage)                :: img1, img2
TYPE(pgmImage), dimension(10) :: setOfImage

To initialize:

  img1%magics='P2'
  img1%createdby='# manually created...'
  img1%n1 = 10
  img1%ny=5

When declared in the same programming unit (variable declaration section) derived data types are visible to that unit only (and sub-units under CONTAINS statement) When declared in a module unit, a derived type can be accessed outside the module through USE statement. You can define a new data type using another data type:

  TYPE matrix
    integer              :: nx, ny
	integer, allocatable :: M(:,:)
  END TYPE matrix
  TYPE header_pgm
	character(len=2)   :: magics
	character(len=255) :: createdby
  END TYPE header_pgm
  TYPE image_pgm
    TYPE(matrix)     :: data
	TYPE(header_pgm) :: header
  END TYPE image_pgm

Then to access it:

  TYPE(image_pgm) :: img
  img%header%magics='P2'
  img%header%createdby='# Manually created...'

Summary

Derived data types enables grouping of data to form logical objects
A fortran program becomes more readable and modular with sensible use of derived data types