Ah, I think you've assumed that the assignment of 10.1.1.1/32 to lo in that example is to replace 127.0.0.1/8. It's in-addition-to. The most common case is multi-homed routers that wish to announce a management address into the IGP, but I've also used it for stuff from proxy farms to making containerized/virtualized microservices a bit more portable, and I'm far from the most sophisticated user. There's people out there doing exotic things with anycast or VPNs or VOIP or MPLS that do this too. I once built a Cisco UCCE site that required it as part of ensuring there was a diverse path for their queue state replication that was in a separate routing protocol convergence domain. And so on - it's far from unusual.