I've seen it used for a modem dial-up program and I've seen it used for the emulation of old computers with serial consoles. It would probably find use with debuggers. Sometimes you just want to pop open a new window, and xterm is the only terminal emulator that will cooperate.
The option parsing is buggy. Only file descriptor 0 works, but that is good enough because of the dup2 system call. Fork, set up the file descriptors, and then exec an xterm like so: xterm -S/0 -T foo -n foo -name foo
I'd love to get the feature, with the exact same syntax, into all the terminal emulators. That would mean that x-terminal-emulator, which is a link to whatever the user installed, would always have the feature.