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I would like to know about some real world examples of hierarchical custom setting.

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We have used them to record approval levels for payments. The org default can have very low levels set (or zero), specific profiles (categories of users) higher levels and specific users (e.g. department manager) the highest levels.

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It is usually used to store values that are not a list but applicable across the organization. For example integration end points that will change across sandboxes.

It can also be used to set a specific value specific to organization and then further specific values for profiles/users etc. For example user preferences can be saved in this. getInstance() method gives the most specific result. Check https://www.salesforce.com/us/developer/docs/apexcode/Content/apex_methods_system_custom_settings.htm

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