(Yes, you can disable network access to Play Services, but it sometimes breaks things and the general point of IPC as a hole still stands.)
They were designed so multiple people could use one device.
Some people use them to separate identities or contain apps they view as bad. I'm not sure if the efficacy of this.
Grapheneos improves them significantly https://grapheneos.org/features#improved-user-profiles
They also added the sensors permission.