Comment # 25 on bug 841070 from Atri Bhattacharya

(In reply to Olaf Hering from comment #15)
> 
> It does not matter if gnome-terminal or $APP does not work for me or not.
> Thats not what the proposed change does. It hides a valid, installed
> application.

It does so to discourage the average user from using xterm as the default
terminal from within GNOME instead of gnome-terminal. 

My understanding of the situation here is this: xterm cannot be removed from
the system because it is *the* fallback terminal, while at the same time it is
nothing more than a fallback terminal that the average user should never need
to use in principle. Presenting xterm on the applications overview breaks
usability when using a touchscreen (where interaction with the
onscreen-keyboard is essential). So I think it is reasonable to keep xterm in
the system (purely in the worst case someone needs it as a fallback) but hide
it from regular user's view.

Is there a concrete way that affects/breaks your/anyone's work?

If a user explicitly needs xterm, (s)he could still access it by means that
have been mentioned before.

Fwiw, the guidelines for what should and should not appear on the GNOME
applications overview is here:
https://developer.gnome.org/hig/stable/application-basics.html.en
and xterm cannot be individually installed/removed from the system.