I run several systems with hundreds of home directories (a custom web hosting setup, where third parties can have control of certain accounts).
Currently any user could SSH in (or via a script) do "ls /home" and see all the accounts on the server. They can't do anything with that information of course, "ls /home/user" would fail, however I'm wondering how "ls /home" could just show the current user's folder.
I've seen a few exploit attempts in the past (clients with insecure code/bad passwords - another topic) where the attacker makes a folder in one account, and then makes an array of symlinks looking at other home folders and trying to guess for sensitive file locations and hoping permissions are weak somewhere. By hiding "ls /home" this would frustrate them and I don't think they usually try too many other techniques.
Just an additional safety net, ideally without going down the path of chroot or jails. It's mostly just to break automated scripts if someone did gain access. The permissions are secure so users only have read/write access inside their own home folder.