I\'m new to python and programming in general, so would really appreciate any clarification on this point.
For example, in the following code:
#
Your example is rather simplified.
In a more complete example fighting wouldn't just display the current state - it would also modify that state. Your monster might get hurt and that would change its hit points and morale. This state has to be stored somewhere. If you use a class it would be natural to add instance variables to store this state.
Using only functions it would be more difficult to find a good place to store the state.