What's the difference between the clinical and the everyday use of the word narcissism i.e. why would you need to label a prevalent personality type?

Different: There's a difference between every day selfishness and the clinical term narcissism. A person with a narcissistic personality disorder has dynamics that are very difficult. There are also different types of narcissist. The worst type is the malignant narcissist. If you wish to read up on narcissism i would recommend that you read a book by alice miller called the drama of the gifted child. It was also published under the name of prisoners of childhood.

One of those: Narcissistic disorder is one of the few diagnosis in the dsm system in which the lay term almost coincides with the definition. Personality disorders are pervasive patterns of behavior, which is different from limited individual behaviors that could fit the description. That is why, in psychiatry, we tend to refrain from diagnosing personality disorders too soon, or at an early age.

Narcissism: The hallmark of a narcissist is an immense ego, grandiosity, and self-importance, as well as being entitled, and a tendency to use and objectify others as well as thinking of people in all-good or all-bad terms instead of shades of gray. The core of a narcissist is profound insecurity. The significance of this is the narcissist eventually drives away everyone around them and is often alone.