SNMP is a protocol use to manage and monitor the devices over the IP network, what is the fuction of MIB(Management Informtion Base) in SNMP?

There are three basic  things when talking about SNMP

1) Manager

2) Agent

3) MIB and OIDs

Manager is a software which is installed on End device (PC), most popular one is PRTG, Agent is found on intermediary devices (Router switches etc) and in simple term Agent is known as the SNMP protocol on the intermediary devices, which of course needs to be Activated and as for MIB (message information block) they are embedded in intermediary devices, its like a database present for each and every component / functionality found on the intermediary devices and OIDs(object Identifiers) holds the individual values of a Specific component  (its could be CPU utilization, or a port traffic or temperature of the intermediary devices)

For example:

If a specific interface of Router (fa0/0) which needs to be monitored for lets say upload / download rates  on the Manager (PRTG), then Manager will coordinate/communicate (GET) with the Agent (SNMP) on the router and then Agent will look into the MIB database of the router and in MIB database different OIDs will be there for that specific interface (fa0/0), and from those different OIDs Agent(SNMP) will choose what values are requested from the Manager, so in this example Manager has requested the values Upload and download rate on fa0/0 port of the router so MIB will give values from the two OIDs to Agent and then Agent will send those OIDs value to the Manager then Manager will plot those values in its Graph.

Little confusion i had when i started learning SNMP How the Agent will know exactly where to look in MIB (vast) database?  

Well, when the request is made by the Manager to Agent , Manager will specifically send the OID number to Agent saying , Hey! fetch me the latest values of these OIDs, and that is how Agent coordinates with the MIB and ask him to retrieve the values of those specific OIDs, that Means when the Manager is being installed or setup on the End device (server) then the OIDs are being defined at that time of setup and now a days mostly all the Manager softwares (PRTG) comes with the OIDs embedded in them and we just need to define what parameters we need to monitor and thats it all those already embedded / predefined OIDs will be used whenever a request is sent to the Agent.

Hope this answers your question.

Assalam-o-Alaikum