Its pretty simple, you do a move, and the lag of that move cancels with the ohmygodimgonnafall animation. (Idk how its called) you can ledgecancel aerials and special moves. Most known one with falco is the ledgecancelled side b on battlefield's platforms. Like instant dropdown ledgehop backwards, then sideb when you're on level with platform, and if you did it right, side b will ledgecancel. You can then run off that platform, and as soon as you are off the plat, side b and youll edgecancel on the other plat. Then fullhop from there, and side b when youre a little bit over the top plat. Towards it of course. And youll successfuly edgecancel on top plat, congrats, you swagged with falco.
Its useful to go from one side to the other, super quick or to throw fast aerials tthrough/on a plat. Although the aerial part is super hard since you need pretty good spacing.
Personally i use it to follow sdi, or an accidental reverse aerial. But like you said, is very situational, and if you overuse it, get ready to be read and punished bad.