I see very weird or even inaccurate descriptions here, so let me say it much simplier how it is most commonly used today:

Programs are expected to be unpacked/installed to proper locations. Like /usr/bin for binaries or /var/lib for their data. But not all programs, especially games and those ported from Windows, are made in recpect to this schema and expect everything in one directory.

So TLDR: For badly ported programs or quick installs that want every of program files in a single folder.