It can replace your physical ID but it also has other useful features.
The most useful one is the ability to generate Identity Proofs that contain only the minimum required information to prove your identity.
They even have an expiration date, a named recever and a motive.
Of course the receiver can verify their legitimacy in the app.
No more sending copies of your ID !
I also think one of the features is proof of majority without revealing your identity. Probably made for adult websites because a ruling was made a while ago that they would have to enforce age restrictions better.