Really it is just a way to do differential pricing. Some people will pay $500, some only $100 while the part only cost $25 to make. The way to maximize profits it sell to both, and find a way to justify the price difference.
As a hypothetical example (I'm not 100% sure if this is how Intel does things), and i5 could just be an i7 except it couldn't handle the higher clock rate. So instead of throwing away a chip that's limited in clock... Intel will sell the chip as an i5.
Or perhaps in another chip, the hyperthreading portion got borked because of a piece of dust landed in the lithography. So instead of selling it as an i7, the hyperthreading portion is fused off and the chip is sold as an i5.
The IBM-Cell in the PS3 was a different approach to the same problem. The Cell was specified as 7-SPUs and 1-CPU, but in actuality... the manufacturing process made 8-SPUs and 1-CPU.
IBM assumed that one of the SPUs would fail during manufacturing, so they only promised to deliver 7 of them per PS3.
You can literally see the 8 SPUs: https://upload.wikimedia.org/wikipedia/commons/e/e0/Cell-Pro...
There's lots of ways to approach the problem. Manufacturing is an imperfect process: not everything is made identically. So the manufacturers have to figure out how to test for differences and... if necessary... sell the same "manufactured" chip in different bins.
Phenom.
https://en.wikipedia.org/wiki/AMD_Phenom
https://en.wikipedia.org/wiki/Phenom_II
Not all the hardware of Cell on PS3 was available if you run the official Linux port. Which was later blatantly removed.
Hopefully somebody who knows more about this than me can jump in and fill in the blanks here.
EDIT: I communicated my point poorly and the comments below mine explain this is much clearer terms