What is python-dev package used for

python-dev

python-dev contains the header files you need to build Python extensions.

lxml

lxml is a Python C-API extension that is compiled when you do pip install lxml. The lxml sources have at least something like #include <Python.h> in the code. The compiler looks for the header file Python.h during compilation, hence those header files need to be on your system such that they can be found.

-dev packages on Linux

On Linux typically, the binary libraries and header files of packages like Python are separate. Hence you can have Python (e.g. package python) installed and everything works fine. But when you want to build extensions you need to install the corresponding -dev package.

python-dev contains everything needed to compile python extension modules (https://docs.python.org/2/extending/extending.html).

Note that Debian already has an lxml package for python 3 (mentioned at http://lxml.de/installation.html); in general it's a good idea to use the packaged version. I'd suggest pip uninstall lxml and then apt-get install python3-lxml.

python-dev is the package that contains the header files for the Python C API, which is used by lxml because it includes Python C extensions for high performance.