Linux, (and Unix in general), was originally a server operating system. Servers would have one or multiple administrators and several regular users, usually hundreds+, who can connect remotely via terminals like this one:

Only administrators (root user or a member of the wheel group on BSD Unices) can add new users. Each user, regular or administrator, can change their own password via the passwd command and they only need to know their previous password for this. Administrators can also change other users' passwords.

On a desktop system, it would be a bad idea to run every app as root, so usually another user is created. And in order to carry out system administration tasks, this user is given access to sudo to gain administrator privileges. So yes, only administrators can create new users.

a new user he will require my (real id password) when setting their own password using (sudo passwd username)!

No, initially you would set some password for them, once they log in, they can just run passwd and change it without knowing the administrator's password.

On the other hand any one can get access to administration just by adding a simple (sudo group)

This isn't meant to be the case. You'd want to have at least one user who has sudo access, but other regular users shouldn't have it.

what is the benefit of changing file permissions because you can do everything in root mode!

As above, regular users aren't supposed to have sudo privileges and then won't be able to access each others' files.

Hope this helps. Here's a more in-depth introduction. And: more information about commonly used system groups