This process happens after the primal cuts are removed.

I guess it's basically the modern "industrialised" alternative to the more traditional use of the carcass after those cuts are removed, which would be to break it down and boil them to make stock.

McDonalds Chicken Nuggets used to be made of this. Apparently they are no longer using it.

There's more info about it here: https://www.snopes.com/fact-check/legal-separation/

Legally it should be labeled as such.