For example you have a Kontakt with,
1ch Strings Pizz
3ch Guitar sus
usage #1 pressing a button on the Kontakt instrument renames your midi tracks according to patch names, so your midi tracks for that instrument are renamed to Strings Pizz, Clarinet, Guit sus respectively.
usage #2 pressing a button next to track name, renames only that track retrieved from the VSTi. For example, a midi track with ch.2 going to this Kontakt instrument, is renamed “Clarinet”.
This feature could be beneficial for people lazy to rename tracks and ends up with a mess while working.