You can use it to block ads that you feel are too competetive to what you're doing on your own site, and don't want your visitor clicking and going to that site instead. e.g - if you're offering a blogging software you might not want your visitors seeing ads for other blogging software that they might like better than yours!
This filter is provided to block Ads from your competitor if they are using Adwords to promote their business. Also, it is a good way to stop irrelevant Ads being displayed on your site. But, you will need to use Adsense Ad preview tool to get the URL of the irrelevant AD site.
Example - You are selling photo-editing software on your website you can block ads from competitors such as adobe who may be promoting photoshop. Example 2 - You have a used car business, you may block ads from autotrader or cars.com.