If they're banned from their own instance, that ban federates out and they're completely banned off that account.
If some other instance bans them, that ban is instance specific and that person can still interact with communities and people from other instances, except the one that banned them.
It's not useless, it's so that the ban can be displayed on other instances. If it weren't propagated, you couldn't know if someone was banned without explicitly looking up their profile on their home instance.