In most CRM systems, terms lead funnel, lead generation funnel, lead conversion funnel are used interchangeably for visual representation of all stages a lead is going through before becoming a paying client.
Consider the following scenario. You are selling CRM software and your target audience is business owners. You've obtained a list of all registered businesses in the state of California. Since these companies know nothing about you, they are called cold leads and they are the top of your lead funnel. You send emails to those companies, inviting them to participate in a free webinar. Those, who clicked the webinar link, showed some interest, so they are moved to the next lead stage - warm leads. Then, after the webinar, a certain portion of your webinar listeners registered for a free trial. They are moved onto the next lead stage and are now considered hot leads. Finally, a certain portion of those hot leads decide to purchase the product. That's the bottom of the lead funnel, where leads convert to customers.
Lead funnel inside CRM gives three main advantages. First, it helps you better understand your sales process or a customer journey. Second, it shows conversion rates for each stage and shows which stages are most critical. Third, it allows you to accurately forecast how many leads you need in each stage in order to hit the desired sales target.