It turns an idle long position into income, and it is most lucrative on exactly the stocks you might least want to hold: hard-to-borrow names with high demand from short sellers.
The trade-offs are real. Lent shares are not covered by sipc-protection while on loan, though collateral is posted; voting rights are lost; dividends become substitute payments taxed as ordinary income; and the broker typically keeps most of the fee.
Example: you hold 3,000 shares of a $25 stock, $75,000, lent at a 30% annual rate with a 50/50 split. Gross fee is $22,500 a year, your share about $11,250 — 15% of position value, materially more than any dividend. On a general-collateral name at 0.3%, the same split yields about $112 a year.
Related: borrow-rate, hard-to-borrow, rehypothecation, sipc-protection