If i'm trying to lose weight, why do i need to create a 500 calorie deficit?

Any calorie deficit at all (even 1 calorie) will cause you to lose weight, but it may be so slow that you don't ever notice it. Creating a 500 calorie deficit is the amount you need to lose 1lb per week (There are 3500 calories in 1lb of fat; 3500/7 days=500 calories per day.)

The reason why you still need to eat a certain amount of calories is that your body needs to take those calories in to continue to function properly. If you were to instead just decrease your calories dramatically, your body would think it was starving, starting all kinds of processes that would make it harder for you to lose weight. And although the weight would eventually come off, not eating enough puts your organs under a lot of stress, can cause heart problems, etc. Your body also needs things from the food other than calories (nutrients, fiber, etc.)

It's actually better for you to eat more and exercise more than it is for you to eat less and exercise less. Use a calculator to figure out your basal metabolic rate: http://www.bmi-calculator.net/bmr-calculator/

That will tell you how many calories you need to eat if doing no exercise. To lose 1 lb a week, subtract 500 calories from that amount and eat that number of calories daily. If you are also exercising, you can eat more!

For example, my BMR is 1500 calories. I also burn 300 calories in exercise every day. 1500+300=1800. So to maintain my weight, I'd eat 1800 calories per day. To lose 1lb a week, I'd subtract 500 from that, leaving me with 1200 calories per day.

Note: Do not eat under 1200 calories a day! It puts you at risk for malnutrition and putting your body into starvation mode. Lose weight at a slower rate (a smaller deficit), OR eat more and exercise more!