The IMS LTI ContentItem allows an external tool to be configured as a "resource picker" or self-configuring tool placement. The tool is launched using LTI and the user goes through a picking process and at the end of the process the external tool POSTs back some information for Sakai that sets the tool configuration for a resource link (i.e. we call them Content Items in the table lti_content).
Here is the public draft of the IMS Specification:
A great use case would be in the Editor - where there is a button to "select an external tool" - the user clicks the pciker and when done the tool is inside of the editor in an iframe.