The reasoning is that the word "other" can be alienating to some folks. The way we use the phrase "the other" to imply something foreign and untrustworthy in common language is a good example of why someone might not want to be called "other" in a form.
Now, this is a really minor thing, and won't impact 99.9+% of your users. But it could impact a few people! It's ultimately up to you whether you think it's clearer/more appropriate for your app to use "other", "not listed", or something else! My goal is not to be prescriptive, just to provide a little color and reasoning.
But in any case, it's the context that matters. Most of the time you don't need to know a person's gender so just don't ask. Many other times gender is just a proxy for something else, such as a person's title. It's better to just ask for their title than their gender.
If the form's request for sex is salient IRL, and the form-filer's sex will be apparent anyway, I don't think refusing or having an expectation of privacy about one's sex is reasonable.
This is not the case for most things, but I do think it goes beyond dating.
There might be some exceptions, like an airline won't accept a non-binary gender because of safety (weight distribution estimation). For a dating site it might make sense to allow anything.
Some planes have weighing systems built into the landing gear but most passenger flights are WAY under max weight (Airbus can tell the pilots if the weight/balance once underway doesn't match what the computer was told).
Male, female. Then "Don't specify". If you're datamining or have specific products for specific nonbinary consumers, add that.
For science and health, be as specific as required or ask for biological sex and demand "male" or "female" as appropriate.
(IMO).
0. Not known
1. Male
2. Female
9. N/A
And it suits everyone.
Not Known is for when no answer is given. This option shouldn't be presented to the user, but is for the case where the field is optional.
"Not Listed" might be a better title for N/A?
Edit: Just saw your edit, makes more sense. Still feels a little on the edge for me, but we're all going to have different needs out of something like this.
The purpose of the standard is to give a numeric code which is language agnostic, for internationalization of forms and software.
Adding other genders isn't really applicable, since there's no common meaning or terminology across languages. M and F are universally recognized because they're grounded in reality: Every language in the world has a term for them.
Like a salesperson asking for my email address: why do you need to know; what is this information used for?
Optimal gender selector: slot machine game with only one pull. Your pronouns are... cherry, apple, seven. Nice.
Many people prefer not to say for whatever reason, and people identifying as anything other than male or female aren't going to be a statistically significant minority for whatever data collection purpose you have.