It starts one of two ways:
1. You are both friends and then one day you "accidentally" hook up. You feel awkward about this and don't know what it means. A one time hook up suddenly becomes an annual thing. Rather than put a label on whatever is going on, the two of you agree to just be "friends". But every time you're alone, the temptation kicks in.
2. You meet each other and maybe hook up a couple of times. You don't want to call it "dating" because neither of you is ready or looking for a relationship. You agree on being "friends who sometimes hook up".
Speaking from personal experience, friends with benefits suck.
I always told myself I would be ready for a relationship at any point, I just had to meet the right guy. (I'm still waiting.) Every guy I've ever been with never felt that I was more than a random hook up. He only texted me when he needed to hook up. He would get mad if I couldn't meet with him when he "needed" me. In boy terms, he was horny. He would constantly talk about hot girls all over social media complaining about how he needs to get some already.
I felt like I was just being used and I hate the fact that I constantly went along with any guy who ever treated me like this. Sure, sometimes I didn't really care because I didn't really have feelings for that guy anyway. I just liked the idea that a guy wanted to still be with me in general even if it was just for hooking up.
"We're not dating so you're welcome to talk to someone else." Whether it was the guy or girl that initiated this, sometimes the other partner doesn't want to talk to someone else but feel as though they have to because their partner mentioned it.
The "friends" part in friends with benefits doesn't always stay the same after a couple hookups. You start to feel like the only time you meet is for sex. You don't simply hang out and chill together. You lose interest in each other and there are no emotions -- there are no strings attached.
I don't think friends with benefits is always the answer.
Sure, for some people it works perfectly, but I think we choose to say this is what "we are" because we're scared to be in a relationship. When you're intimate with someone you want to feel that passion and that flutter of butterflies in your stomach when you're together. The term "friends with benefits" simply just takes that feeling away, especially when one of you wants more.