I can’t remember for sure now, but IIRC if you lower that setting and an uploaded image is larger than that, Discourse will attempt to resize the image to bring it down.
I think it’s tied to the png to jpg quality setting? It was a while ago now but I think Sam worked on the image resizer.
With regards to anyone who’d want to change it (or rather want smaller image sizes) I’d imagine any site where image quality is less important (so most sites apart from photography sites).
Quick search returned this - so looks like the resizer hasn’t been implemented yet (but I was sure it had 
)