Crypto exchanges usually offer two types of margin: isolated and cross margin.
This distinction essentially determines your liquidation price as well as the consequences of liquidation.
Cross margin means that your entire account can be used as margin for a position.
The advantage is that using your entire account as margin typically means you don't need to use high leverage to open positions. This allows you to set the liquidation price further away from your entry point since the position has greater margin/is well collateralized.
The disadvantage is that since your entire account is available as margin, it can be a problem if the price reaches your liquidation point.
Isolated margin means that you can set a fixed amount of margin for a given position.
The advantage is that if the position reaches your liquidation price, it is forcibly closed, but the rest of your account remains protected. In this sense, it is perhaps the best (or at least more flexible) risk management tool.
Whenever you use cross margin without strict protection (a stop-market order for all your positions), the risk is that the market can liquidate you with one position.
Isolated margin is not a magic bullet—you still need to think about position size, % of the account at risk, liquidation price, and so on—but at least you know that your account won't be wiped out by one position (with proper setup).
Regarding the previous points about flexibility, isolated margin also allows you to change the leverage used, add/remove collateral, and much more depending on your trading style and how you want to build a position.
One example is adding margin to reduce leverage and thus increase the distance between the market and your liquidation. Removing margin to increase leverage, freeing up margin for other positions, and many other options.
In general, knowing your liquidation, % of account at risk, and position size will do the heavy lifting in the risk management department.
But understanding how leverage actually works and using it to improve capital efficiency—in relation to simultaneous positions, counterparty risk, single position risk, and net risk—is a huge plus.