In what way is Banquo a foil to Macbeth and why does Shakespeare do this?

Banquo definitely serves as a foil to Macbeth in Shakespeare's Macbeth.   Macbeth is predicted to become king, while Banquo is predicted to be the father of many kings.   In other words, his heirs will be kings. Macbeth embarks on a destructive run of murders in order to first be crowned kind, and then to hold on to the thrown.

Explanation:

Macbeth embarks on a destructive run of murders in order to first be crowned kind, and then to hold on to the thrown.  He is obsessed with ambition.

Banquo on the other hand finds the idea of having his heirs rule Scotland attractive, but does not take steps of any kind to make it happen.  He is not obsessed by ambition.

Both face similar situations, but Banquo handles the situation as it should be handled, while Macbeth does not.