It's all about able to tagging a ship and tracking it, whether you use it for observing their movement or their status or aiming your weapons at it is all the same. Though, the range is debate able.
Similarily, I've discussed about IFF a while ago on Discord to track ships and players for the purpose of reputation.
If a someone plays a pirate and turns off his IFF then nobody would know what he did, hence, his reputation won't change. Now this would allow law enforcement to track him and counter his strategy of dodging traffic control tracking via IFF.