When a model edits code or a document, showing only the final result forces a person to re-read everything from scratch to figure out what changed and why. Borrowing version control's diff notation — minus for removed, plus for added — lets changed spots jump out immediately and cuts review time considerably.
Rather than accept-or-reject-everything, splitting the change into meaningful hunks that can each be accepted or rejected handles the common case of "this part is right, that part isn't." An accepted line fades from highlighted green into normal text; a rejected line reverts to what it was.
Auto-applying a change before anyone reviews it and applying it after review are different trust situations — auto-apply is fine for an easily-reversible document edit, but a costly change like production code is safer with a review step that isn't skipped.
When to use
Use it for a proposed edit to something that already exists — code, a document. Doesn't apply to something generated from scratch, where there's no prior version to diff against.