Hi abiyo!
That's a really interesting question! I've been thinking about that for quite a while as well. Why is the matrix multiplication done in the manner it is done? I mean, if we have matrices A and B and multiply AB, why do we take the columns in B and multiply with the rows in A, why not rows in B and multiply by rows in A, or why just not multiply element by element in A and B and just skip this adding procedure you do when you multiply two matrices?
I cannot give you a comprehensive answer, but it seems that when we define multiplication of matrices the way we do, there are many applications out there that actually could make use of such a definition.
I'll try with an example from economics. Suppose you have the following matrix,
A = \begin{bmatrix} 3 & 1 \\ 5 & 2 \end{bmatrix}.
This matrix shall be interpreted as follows: The first column describes how many units of copper (first row) and plastics (second row) is needed to produce one unit of memory chip. The second column describes how many units of copper and plastics is needed to produce one unit of cpu chip. So, you need 3 units of copper and 5 units of plastics to produce one unit of memory chip, and so on. (I just made this figures up, don't take them too seriously.)
Now, we have a second matrix,
B = \begin{bmatrix} 9 & 8 \\ 7 & 6 \end{bmatrix}.
The first column in this matrix describes how many units of memory chips (first row) and cpu chips (second row) you need to produce a computer. The second column describes how many units of memory and cpu chips you need to produce a radio. So, you need 9 units of memory chips and 7 units of cpu chips to produce a computer, and so on.
So, let us now buy some computers and radios, let's say we need 2 computers and 3 radios. We describe this with the vector
X = \begin{bmatrix} 2 \\ 3 \end{bmatrix}.
So how many memory chips and cpu chips must the chips factory produce to fullfill your needs of 2 computers and 3 radios? Easy, it must be BX, since
BX = \begin{bmatrix} 9*2 + 8*3 \\ 7*2 + 6*3 \end{bmatrix}<br />
= \begin{bmatrix} 42 \\ 32 \end{bmatrix}.
(Remember that the left column in B was the amount of memory and cpu you needed to produce 1 computer, and since you now need 2 computers, you need twice as much memory and cpu.)
In the same manner, to calculate how much raw materials (copper and plastics) needed for that amount of memory and cpu chips (described by BX) your computers and radios need, you take A times BX. That's because BX is a column vector that describes how much memory and cpu you have, and A describes how much copper and plastics is needed per memory chip and per cpu chip. So all in all you get the raw material needed for your computers and radios as
ABX = \begin{bmatrix} 3*42 + 1*32 \\ 5*42 + 2*32 \end{bmatrix}<br />
= \begin{bmatrix} 158 \\ 274 \end{bmatrix},
where the first row describes the amount of copper needed, and the second row the amount of plastics needed.
To conclude, and perhaps finally answer your question, we could as well look at AB directly, and see that it describes the raw material of copper and plastics needed per computer (left column) or per radio (right column). You see that if you do the multiplication:
AB = \begin{bmatrix} 3*9 + 1*7 & 3*8 + 1*6 \\ 5*9 + 2*7 & 5*8 + 2*6\end{bmatrix}<br />
= \begin{bmatrix} 34 & 30 \\ 59 & 52\end{bmatrix}.
So, in a way, you can say that you go from A (raw materials) -> B (intermediate materials) -> X (finished products). And the matrix AB produced by the matrix multiplication, sort of puts together the first two steps in that chain.
I hope I got all figures right, and that this will help you somewhat in you understanding.
This example was inspired by an example from a rather good textbook in Linear algebra I had, but it's in Swedish, so I guess you don't have any use of it...
EDIT: One more thing: This matrix multiplication done here, is actually just a generalization of a normal multiplication from one to several dimensions (in this case to two dimensions, with 2x2 matrices). Because, imagine instead that we have a computer that only needs cpu chips and nothing more, and that cpu chips in turn only need copper to be produced. Then, if for every unit cpu, you need 1 unit of copper (A), and for every unit of computer, you need 7 units of cpu (B), and you'd like 2 computers (X), then the total amount of copper needed for these two computers is A*B*X = 1*7*2=14. So in this 1-dimensional case, it is very clear that it is multiplication we have to do. And for dimensions over 1, it seems that matrix multiplication gives us just the information we want, as my 2-dimensional example above shows.