I'm not an expert, but I can think of a couple places where this would be handy. First, if you're dealing with WAN links that already have a reasonably large MTU, override allows you to bump up the MPLS MTU higher to account for the additional MPLS encapsulation so that the resulting packet fully consumes the interface MTU. Without override you can only do this on interfaces with MTUs less than 1524 bytes.
Second, in some cases it might be desirable to allow larger packets in the MPLS core than what is available on the local WAN link. Maybe the core can handle nice large jumbo frames but the local link can't. For efficiency across the network as a whole, you might accept fragmentation at the edge which impacts fewer users, than dealing with smaller less efficient packets in the core. The performance impact could be minimal if you have a platform on either end of the link that can handle fragmentation and reassembly in hardware.
In general, it's probably one of those commands (the override portion), that should be used with caution and only if you're sure it's what you need. I don't know the history, but this looks like a command that was implemented because of a specific customer environment that would really benefit from it.
Here's the command reference for curious folks: Cisco IOS Multiprotocol Label Switching Command Reference - mpls ldp atm vc-merge through mpls static binding ipv4 [Sup…
