Trying to understand VLANs (port-based Vs. 802.1Q)

I'm trying to understand the differences between port-bases & 802.1Q VLANS.
I've done a bit of Googleing but really cant see why I would use one over
the other.

If I understand it correctly, port-based is down and dirty. The devices in
the list can access these other ports.
VLAN1 - 1 2 3
VLAN2 - 4 5 3
VLAN3 - 6 7 3

Above, each port would see one other port, and everyone can see port 3
I think I have the above concept clear. So now onto 802.1Q.

I've got the part about tagging or untagging outgoing packets, but am not
clear about the incoming packets *tagged, or untagged) and how that works
exactly. Also why/what advantages are there to this method over port based.

Thanks