Haven't used lemmy in particular. But in theory defederation exists to block bad actors. Since anyone can host a server themselves and no one can stop the servers outside some kind of government intervention, each server needs the ability to block a spammy or even illegal content filled server.
In reality, it is used for that and the censorship of ideas server owners don't like... or even just blocking a server because the admins of each server had a spat. It has been likened to little fifedoms each with their own flavor of tyrant, a little drematic imo but not wholely wrong either.
Another use is if you want to use the software, but don't want/need connections to the greater network. So you fully defederate and only allow your friends to have logins to your isolated server.
In reality, it is used for that and the censorship of ideas server owners don't like... or even just blocking a server because the admins of each server had a spat. It has been likened to little fifedoms each with their own flavor of tyrant, a little drematic imo but not wholely wrong either.
Another use is if you want to use the software, but don't want/need connections to the greater network. So you fully defederate and only allow your friends to have logins to your isolated server.