Advertising agencies are hired by companies (clients) to create communications that persuade people to do things. Traditionally the goal of an advertisement is to persuade the target to buy something, but advertising is also used to raise awareness about a variety of issues and to persuade people to do things other than purchase products.
The top advertising agencies are, above all else, those that are well known in the industry and handle high profile pieces of business. Most have established a network of agencies in order to deliver client service on a local basis. "Satellite" offices are staffed minimally and often rely on the flagship office for assistance with creative development and media placement.
In the 1990's the race to establish robust networks led to the top advertising agencies being aggregated under four major holding companies; Omnicom, Interpublic, WPP, and Publicis. These four companies pull in over half of the revenue generated by the entire advertising industry.
There are many benefits to working at one of the top advertising agencies in the industry. For one, it looks good on your resume. Many industry professionals find that if they've never worked at one of the top agencies they are at a disadvantage when pursuing new job opportunities. You get to work on large clients with enough money to do major campaigns. Your work is seen by a huge number of people, including your family and friends. You will learn solid "best practices" and work with some of the brightest people in the industry.
But for many people a midsize or small agency may be a better choice. Generally there is a less rigid management structure and a more entrepreneurial environment. The entire company is run by people you know and you will have access to top level executives. Young employees have more opportunities to be involved in the big picture of a campaign rather than being relegated to a very narrowly defined role.
A smart strategy that is sometimes recommended is to work at one of the top advertising agencies for just one or two years after joining the industry, then move to a smaller agency where you can be a more significant part of the operations and gain a wider range of experience faster. After five or ten years you may consider moving back to a major agency. If you do, you'll probably find that you rose higher faster than people that spent their whole careers at big agencies. But do keep in mind that you can get pigeonholed as a small agency specialist, which is why it's important to get some experience at one of the top advertising agencies first and then to move back before too much time passes.