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You could also produce special purpose applications this way, say to provide access to the online library catalog, or a run a gopher client for use in a public terminal lab. Telnetting to a unix account running some sort of restricted shell was how these often worked.

A sibling comment I can't reply to asks if you can do with with unix permissions.

These were really intended for anonymous guest access, or at least often used for this purpose. You couldn't do the same things with the file permissions systems at the time.

Back in the day we'd use chroot to achieve something similar

https://linux.die.net/man/1/chroot

Yes, in reality you might use chroot, limited filesystem permissions, and a restricted shell as a belt-and-suspenders approach.

Can't you do that with regular Unix permissions?