A rhythm plays, you pick the notation that matches it. Rhythm dictation trains you to connect what you hear with what it looks like on paper, which is essential for reading, writing and transcribing music.
Level 1 uses one bar of quarter notes, eighth notes and quarter rests. Level 2 adds sixteenth notes and eighth rests. After that the vocabulary stays the same and the phrases get longer: two bars at levels 3 and 4, up to five bars at levels 9 and 10, so the challenge becomes remembering and placing more beats.
Count the beat out loud or tap it while you listen, then place each sound against that pulse. Most mistakes come from losing the beat, not from misreading the notes.
Because silence doesn't announce itself. You only notice a rest if you're feeling the pulse continuously, which is exactly the habit dictation builds.