Troll / spam accounts posted CSAM in !lemmyshitpost@lemmy.world. That spread with federation and every admin ended up involuntarily hosting such content.
Application based sign up means that if a user wants to subscribe they have to fill out a form and a .world admin gets to review it and approve or reject their sign up. It's a measure of controlling who gets in and limiting the amount of bots and possibly troll that join an instance.