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I see very weird or even inaccurate descriptions here, so let me say it much simplier how it is most commonly used today:
Programs are expected to be unpacked/installed to proper locations. Like /usr/bin for binaries or /var/lib for their data.
But not all programs, especially games and those ported from Windows, are made in recpect to this schema and expect everything in one directory.
So TLDR:
For badly ported programs or quick installs that want every of program files in a single folder.
I see very weird or even inaccurate descriptions here, so let me say it much simplier how it is most commonly used today:
Programs are expected to be unpacked/installed to proper locations. Like /usr/bin for binaries or /var/lib for their data. But not all programs, especially games and those ported from Windows, are made in recpect to this schema and expect everything in one directory.
So TLDR: For badly ported programs or quick installs that want every of program files in a single folder.