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On hold is handy for contexts that you want to keep in the database but don't use every day. As one example, I used to travel internationally several times a year, and had several contexts that were only relevant when I was on one of those trips.

While I was in the states, I set those contexts to On Hold so the tasks in them wouldn't show up on my lists. I could imagine someone doing something similar if some of their contexts were only useful during certain times of the year - say a seasonal business or something.