Here's an example:
You have different areas in a level that each have different music loops. Within each area the music changes based on player health.
In Wwise you'd have a top-level switch container that uses your "Area" switch group. Inside that container there would be multiple switch containers (one for each area), and they would all use the "Player Health" switch group. Inside those containers you would have all possible music tracks for the container's corresponding area.
So if you're in Area 1 and your health is normal, you'd set the switch on the Area switch group to 1 and the switch on the Player Health switch group to normal. If the player loses health, you'd set the Player Health switch to Low, and you'd hear the Area 1/Low Health music. If the player then moves to Area 2, you'd set the Area switch group to 2, and you'd be hearing Area 2/Low Health music. Player heals while still in Area 2, and you get the Area 2/Normal Health music, etc. etc.
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That's just one example. I'm sure there are plenty of situations where nested switch containers could be useful.