Do they really? Where do you live? I'd never sign a paper like that.
Many people don't know it's there, for various reasons. But it typically is - after all, that's just corporations learning from history.
And yes, I've tried to push back on those, and so far no employer has been willing to negotiate.
There are any amount of large companies where being employed by multiple entities is either frowned upon to expressly verboten. Of course, there are also any number of companies that do no care as long as you deliver, and many that actively encourage / expect nerds to nerd out in our spare time :)
It boils down to, employee transfers IP to their consulting firm, and the firm agrees to transfer ownership of the IP for which hours were billed to produce.
IME, the firm I worked for would not bill clients for work done to our shared libraries. I'd record those hours to the firm itself, but I would still get paid the same.
I had colleagues would worked on a project in their space time, their price was reasonable wanting only compensation for the hours spend working on. The company didn't want it, but they also could not sell it, because if was so heavily tied into our systems and work flows that they couldn't reasonably sell it anywhere else.
One of those developers then started working on another project, one that was so fare away from what we did that there was no way the company would want it and turned that project into a very successful business.
In reality what happens is that people will work on something, quit, and the spend a few months on polishing and then release their project or sell it. Very few companies will want to spend time going after a former employee building some side business far removed from their core business.