Inventories aren't compulsory in a tenancy agreement or for the deposit protection scheme, but in practice they're essential! As a tenant, an inventory is your record of the condition of the property when you moved in and your protection for getting your full deposit back.
Both parties should go through the inventory at the start of the tenancy. If the property is unfurnished it will detail things like the condition of the property, any damage to paintwork etc that already exists and the condition of appliances. If the property is furnished it will cover all items of furniture down to the number of knives and forks!
As a tenant, it's useful to take a photographic record of the state of the property when you move in, to protect yourself if any disputes arise later on.
The inventory should be signed by both parties and appended to the tenancy agreement. At the end of your tenancy the landlord will check the state of the property and see if it matches the signed inventory - if anything is damaged more than can be considered 'fair use', they can use some of your deposit on repairs.
Any costs for repairs carried out must be agreed by both parties - if you don't agree with your landlord you can dispute their findings by getting in touch with your deposit protection scheme.
