1) You need to do something when many windows are open. Making windows small is predictable and lets the user position the windows "correctly".

Possible "correct" positions I can think of is: move a window to a different workspace (so not all are visible at the same time). Make a window floating (I often have a small terminal open that I shove into deadspace of another window).

2) It can serve as a selection pane. Half of the screen is devoted to the current window, While the other half (possibly sized to take up less than half the screen) is storing a bunch of windows to be swapped in for the current one.

I use bspwm daily and the benefit is that you get a predictable behavior when you launch a new terminal or w/e, which is especially nice when you navigate almost entirely by keyboard; you know where the window will spawn.

Just because you can does not mean you should. You are responsible to arrange your workspaces in a usable manner yourself. I personally make use of i3's (also a tiling WM) tabbed mode where I can make a stack of windows occupy the same area with a list of windows above it, much like tabs in a web browser. Tabbed mode is useful for when I open a bunch of programs that I don't want to close, but don't need to see all at the same time either.

That may look small on a single laptop screen, but on a ultrawide/4k/multihead display it looks great. The ability to choose lets me take advantage of my hardware. (I'm looking at you, macOS, and your 2 window split limit!)