A docking bay is needed for ships wanting to dock with that entity. They enter the docking bay fully.
Docking ports theoretically would allow ships to dock with the entity without needing to fully enter it (like attaching alongside). While this has been alluded to on the rules for ages, this isn't a functional feature in SWC and I'm not sure whether it ever will be since you can already enter entities from other entities at the same location without needing to dock. This makes docking ports a bit redundant.