The use of instance-local storage that is not persistent when an instance is stopped is pretty simple: It’s a very large chunk of space useful for transient things. They’re the perfect target for mounting to /tmp, and is extremely useful if your server handles very large files transiently.
For example, if you were building a group of instances to do voice-to-text translation of uploaded video-files, instance-local storage would be just the thing you want to put the in-process files on. It may be there for a few hours while the file is processed, but once it’s done it can be deleted and another one taken up. You don’t need EBS for that, and it’s a lot cheaper to run that kind of storage out of instance-local rather than EBS.
Instance-local storage is meant to be used as scratch-space for running processing, not long-term storage. If your workload doesn’t use scratch-space for anything, or what it needs is so small as to not be significant, then it isn’t a good fit for you.