From what I hear from a friend who races Spec Miata (and I assume this applies to tire shaving in general), once a tire has been on the ground, most shops won't shave them as the sand and grit ruins the blades. So this is only for brand new tires.
Typically, folks will shave them right down to 2/32 (so that they're technically still DOT legal...at least for a little while).
As for why- Shaving the tire removes tread depth which reduces "squirming" of the tread blocks and improves overall performance at the cost of longevity and wet weather traction, of course. Shaving also lightens up the tire out at the circumference which is really important.
