While mouse event tracking is already possible in various modes and encodings, this feature seems most used by alt-screen applications however.
The reason why primary screen applications (such as your shell) usually don't make use of the mouse, is the design problem, that whenever the application is requesting mouse tracking events, the user cannot use the mouse to select text on the screen anymore.
With this VT extension, a new mode is introduced to inform the terminal that the user may still use the mouse to select text, but still have mouse events being reported to the application to allow passive tracking of mouse events.