This was developed in the 1930s to avoid the cost of shooting on location or so that footage could be shot in a studio rather than having to develop complicated (and expensive) innovations simply to film road scenes. But at the time, it was also a groundbreaking method for placing actors in scenes which could be combined with new special effects and props. Take this scene from 'Jason and the Argonauts' (1963), in which Jason (Todd Armstrong) fights the skeletons grown from the Hydra's teeth.
If you look closely, you can see that the effect used is rear projection. See how fuzzy the live actors appear compared to the crisp skeletons. Another tell-tale sign is that the skeletons only ever appear in the foreground or to the side of Jason.
This scene is comprised of two separate elements. First, Armstrong was filmed performing the fight choreography. Next, the skeletons were animated in stop motion by legendary effects artist Ray Harryhausen, who filmed them over the Armstrong footage which was rear projected. Stop motion is a lengthy, tedious method of animation which requires the artists to move each figurine - such as the skeletons - in tiny increments, frame by frame. It was rather like greenscreen in this respect, since it allowed cinematographers to create sequences which might otherwise have looked unconvincing if attempted, or probably simply impossible to achieve.
The projected and stunt sections of the footage are impressively intercut in 'Dr. No' (1962) to heighten the tension and help the audience identify with Bond.
In road scenes, the considerations behind using rear projection are a bit different. Because the dialogue needs to be clearly recorded, it becomes difficult to record in live traffic, and because cameras, for most of the 20th century, weren't exactly graceful machines (see 'dolly'), mounting a camera rig on the front of a car in traffic didn't make too much sense. In the car chase scene from 'Dr. No' (1962), the closeups of Sean Connery’s expressions were rear projected, while the driving shots were performed by stunt drivers.
Today you'll usually only see this technique used by filmmakers who want to make a visual homage to the films which benefited from it before 1970, such as the James Bond films or older black and white classics, in order to try to evoke the atmosphere of this once revolutionary technique in action.
On the right, you'll see how great directors like Alfred Hitchcock and Quentin Tarantino have used its sometimes fake quality to achieve dramatic effect, and how Industrial Light and Magic, the team behind the Star Wars films, are creating a new high-tech version of rear projection.
The enduring value of older techniques like rear projection is their ease of use and thus their attractiveness to productions with restricted budgets. Every time you see a character in 'Star Trek: the Next Generation' (1987-1994) use a turbolift, a rear projection of different decks of the ship was used to maintain the illusion that it was a near-instantaneous means of conveyance.