The difference is point of view :

3rd Person : Er / sie versteht

1st Person Plural / 2nd Person Formal : Wir / Sie verstehen

Same verb, just different forms. 'Regular' verbs in English have only two forms: the name of the verb (understand) and a second form adding an 's' at the end. So, "I, you, we, they" understand and "he, she, it" understands. German, however, has more endings for 'regular' verbs.

The website below provides a good review:

https://www.thoughtco.com/present-tense-verb-conjugations-4068852

Versteht is for: He, she, it etc Verstehen is for: we, they OR it can be for formal: Formal you (Sie)

it is known as verb conjugation.

hello Jerry... verstehen is used for they. Example: Sie verstehen deutsch (''Sie'' as they). Versteht is used for: es, sie (she) and es. Example: Er versteht deutsch / Sie versteht deutsch. Hope it helped.

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I am not an expert in Deutsch but I know this verb usage. It is used as below for different personal pronouns. Ich Verstehe - I understand Du Verstehst - You understands Er Versteht - He understands Ihr Versteht - You (plural) understands Sie/Wir Verstehen - They/we understand. Sorry if there is any mistake, I just started learning Deutsch.

The replies here really helped! Thanks for asking this question and thanks to all the ones who replied!