They work similar to vlookup function in Excel (except only valid for looking up numerical values) i.e. in a table there is a column containing keys to the left and based on the value of key you return a value from the cell at the intersection of the named header column and the row the key is on.
Mostly they are used where instance parameter variations need to drive other instance parameters. Meaning there is a set of possible values for an instance parameter and the one selected is based on the value of another instance parameter. Basically where it is impractical to create all the type variations that you would otherwise need to if using type parameters and type catalogues for the same.
The other advantage is the csv input may come directly from product information tables so it can be quickly formatted and imported. They are mostly used in MEP as you say, not seen them used much outside of that. I don't think there is any real need there.
Lookup Tables | Revit | Autodesk Knowledge Network
I also noted this a while back:
Solved: Re: Creating Window Library with all combinations - Autodesk Community - Revit Products
Perhaps there are a set of parameters whose combined permutations could vary beyond a practical set list of types i.e. you don't know what someone is going to request but you can allow for all permutations and so number them in a logical way to put a simple number id to the exact request.