Some materials (Ex. Aluminum) do not have a definite yield point. In that case, a parallel line is drawn at an offset distance (usually 0.1-0.2 %) to intercept the stress-strain curve. The intersection value is considered as yield stress or proof stress.

It is a standard method (acording to ASTM and other standards) for determination of yield stress of materials that do not have clearly visible yield point on stress-strain curve, as dr. Dinaharan said. It allows one to compare yield stress of diferent materials, that is why it is widely used in strength calculations. Of course, if you build very fine stress-strain curve you could see that nonlinearity begins long before the yield stress, obtained by offset method. This could be considered as "disadvantege" of this method.