As a heuristic it correlates quite well to many measures. The more someone’s diet falls on the ultra-processed end of the spectrum and the less they eat of unprocessed foods, the higher the rate of health problems.
A simple example of the effects of processing would be considering an apple: Eating a whole apple is the healthiest because you consume all of the fiber and the digestion process is slowed because you have to break it down. Crushing it into something like apple sauce preserves much of the structure but now it absorbs faster and it’s easier to overeat it before your body can recognize it’s full. Processing it further to apple juice removes the fiber and now makes it spike your blood sugar and it’s easy to consume a lot of sugar.
Ultra processed would take this even further, packaging it in a container with added sugar and some preservatives for shelf life. This is where it enters kids (and adults) diets, where it is far removed from the unprocessed Apple it started as.