When you finish a book you can review it, or assign shelves. The default shelves are to-read and read but you can add many custom ones too. The shelves work like tags. Once you have a decent amount of books with tags, goodreads will start recommending books based on these tags.

For example, if you have a 'non-fiction' shelf, goodreads will give you books others have rated high with the same tag at https://www.goodreads.com/recommendations/shelf/non-fiction

It's much more specific and for me works better than the 'because you read book X, you might like book Y' which is often very random.