When is SeTcbPrivilege used? ("Act as part of the operating system.)

Acting as a part of the operating system allows you to do things like create login tokens. It's unlikely that you would ever need to write a service that uses this privilege unless you're writing an authentication provider.

Since you can create access tokens, you can act as any user. Of course, this means that you can run programs under the SYSTEM account, but there are much easier ways to run something as SYSTEM.

To add to Gabe's answer, here is what MS says,

Allows a process to assume the identity of any user and thus gain access to the resources that the user is authorized to access. Typically, only low-level authentication services require this privilege.

Default setting: Not assigned.

Note that potential access is not limited to what is associated with the user by default; the calling process might request that arbitrary additional privileges be added to the access token. The calling process might also build an access token that does not provide a primary identity for tracking events in the audit log.

When a service requires this privilege, configure the service to log on using the Local System account, which has the privilege inherently. Do not create a separate account and assign the privilege to it.

Source: Microsoft TechNet