Purpose of a Limit Switch?

According to V5 Electronics - Products - V5 - VEX Robotics , they “are great for signaling when a robot arm has reached the top or bottom of its motion.” How exactly does this work?

You place the arm of the switch at the farthest point you want a moving piece to go before it stops. In your code you have a motor/servo go until the switch has been physically pressed, and then its shuts off. This allows you to add a measure of protection for your robot from overshooting its mark.

Think of a light switch with a weak spring in it. Imagine a lightbulb wired to that switch. Without anybody pressing on the switch, the light stays on, but if you press down on the switch with your finger, the light goes off. As soon as you release the switch, the spring pops the switch back up and the light goes on again. The Cortex can keep track of those on/off signals and know when something is pressing on the switch.

Due to their design, they are more sensitive than a bumper switch even though they have similar uses. However, this also means they are more susceptible to damage, unlike the bumper switch

here is a picture of one being used to detect when the arm is all the way down:

taken from NewTrippleLift - jpearman

in this case it would be used in driver control to prevent the arm from pulling down more, this is more important on this type of lift because the chain can easily snap

Could they also be used for scissor lifts? Would that make sense?

Yes, anything where at some point X you’d like things to start or stop or do something.

Some teams use them and/or bumper switches to determine when their robot has hit the side of the playing field during autonomous, you know so they don’t try to keep going and burn out their tiny little trigger happy PTC’s.

The switch can be read with code, as either pressed or unpressed and you can do WHATEVER YOU WANT when that happens.