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That's a good explanation. To carry it a little further, ghost players are created minutes before a game and cease to exist minutes after the game ends, so they don't accumulate statistics. They are supposedly average in all ways for players at their position and level (AAA, Rookie, etc.).
Ghost players are most often used in historical universes with one or more levels of minor leaguers added, though they can be used in fictional universes, also. In historical universes, each organization usually has too many players to fit them all on the major league roster, but too few to fill out an entire AAA team, so ghosts are used to make up the difference.
They're never mandatory. If you don't like the idea of ghosts there are ways to get around them, such as using a secondary roster instead of a minor league system, or filling out your minors with fictional players but checking the 'do not allow fictional players to reach the majors' box during league creation.
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