Lookup columns are a quick and easy way to reference data residing at a single point from multiple locations in the same site, without having to recreate the source.
One such case is a scenario of a custom list with list items primarily enticing with images. It becomes just so irresistible to be able to use images from this list into another. Another example could be referring to Wiki pages from the Wiki Page library. While in the former case the OOTB reference however fails to render the graphic, in the latter, if you ever had to do it, you’d know what it means – the default reference is nothing more than a seemingly encrypted text termed as Doc ID not even remotely indicating the page name. These are not the only scenarios, but I believe most of the situations one might come across can still be related to either of the two.