I think it has it's history in the black lesbian community, but like many other things has been appropriated and has come to be used very differently by the identity politics, queer theory crowd.

It's to try and lump gay and bi women together on the basis that they're both attracted to women, while erasing the fact that lesbians are lesbians and not bi because they're also not attracted to men. By putting the emphasis on the 'attracted to women' bit and only that, it vanishes half of what it means to be a lesbian, as if the 'not attracted to men' part was less important or unspeakable. This is seen as progressive as it's more 'inclusive'. It breaks up lesbian identity by suggesting that lesbian and bi women's experience of being attracted to women is exactly the same, so no distinction needs to be made between what it means to be a lesbian or bi woman.

Plus wherever I've seen it used, MTTs are considered women, so it bolsters their identity as 'women' who love women. It takes the emphasis off bisexuality and homosexuality (ie that sexual orientation is based on sex) and puts the emphasis on the word 'woman' which we all know has no definite meaning and is an identity up for grabs by anyone who feels like claiming it. /s

In short it's ended up being a lesbian erasing term, like 'queer', that seeks to break down women's boundaries and ability to define their specific experiences, or organise and find community along those specific lines, and therefore have an 'excuse' for not accepting men into their spaces and love lives.