The Principle of Charity: You should try to interpret the behaviors of others in ways that maximize the reasonableness of those behaviors.
To appreciate why The Principle of Charity is helpful, you need to keep in mind that our understandings for why people do things -- our explanations -- involve interpretations or translations. That is, often we translate what we observe into an explanation for why we observed what we did. And translations can be lousy. Hence, applying The Principle of Charity involves asking oneself the following question: How can I translate the behaviors I have observed in such a way that makes those behaviors seem reasonable?
But why should we do that? I think the following quote speaks to that question:
“We don't see things as they are, we see them as we are.” - Anaïs Nin
Our own psychology plays a big role in how we interpret others' actions. Our interpretation of others is a kind of Rorschach Test.
The following image summarizes what has been said so far:
Finally, here is an extended discussion of The Principle of Charity.