Quoting the documentation:

Android application (APK) files contain executable bytecode files in the form of Dalvik Executable (DEX) files, which contain the compiled code used to run your app. The Dalvik Executable specification limits the total number of methods that can be referenced within a single DEX file to 65,536, including Android framework methods, library methods, and methods in your own code. Getting past this limit requires that you configure your app build process to generate more than one DEX file, known as a multidex configuration.

So, the feature is: it allows your complex app to compile. The scenarios for using it are when your app fails to compile due to hitting the 64K DEX method reference limit. This appears as a build error, such as:

Conversion to Dalvik format failed: Unable to execute dex: method ID not in [0, 0xffff]: 65536

It's as simple as this

A single .dex file can have 65,536 methods(references) so if the number of references exceeds 65,536, you go with multidex.

More Explanation!

An android application program is compiled into a .dex file which in turn zipped to a single .apk file.
DVM (Dalvik Virtual Machine) uses .dex file/files to execute bytecodes.

What causes the number of references to exceed 65,536 limits?
Methods written by you + Android Framework methods + Third party library(eg Volley,Retrofit, Facebook SDK etc) methods.
I have read "somewhere"
App Compat 24.2.1 contains 16.5k methods
Google Play Services GCM 9.6.1 contains 16.7k methods
So if you have created a simple Hello world application which has App Compat 24.2.1, you are already 1/4 way to cross the single dex methods limit

Accroding Android developer official site.

If your minSdkVersion is set to 21 or higher, multidex is enabled by default and you do not need the multidex support library.