When should this utility be used, and when it shouldn't be used for doing a reset?

The documentation references the ability to do a reset against the database with db-init.sh.

I tried to use this and I could no longer see any data in the catalog. Granted I had deleted all collections ahead of time, but after creating a new identity source collection and publishing it, no data would show.

I proceeded to go down the route of dropping the tables and trying to use the statements in the documentation to recreate the roles and databases and then I was able to run db-init except for the fact that reporting was also installed I wasn't able to get past errors with the reporting roles / configuration. Tomcat was giving exceptions. So I ended up dropping the tables again and uninstalling Identity Governance and re-installing it, letting it create everything from scratch.