This is used when there is source/dest filtering happening on the network (such as in certain cloud providers where you can't send packets from 10.0.0.1/32 to 192.168.1.2/32 because 10.0.0.1/32 is not valid, so you pack it into another IP packet that makes the source seem like 192.168.1.3/32).
https://docs.projectcalico.org/v3.2/usage/configuration/ip-i...
This is used when there is source/dest filtering happening on the network (such as in certain cloud providers where you can't send packets from 10.0.0.1/32 to 192.168.1.2/32 because 10.0.0.1/32 is not valid, so you pack it into another IP packet that makes the source seem like 192.168.1.3/32).