the practical meaning shows just how Google and others treat contextual links. The text in the "Miserable Failure" link is what causes this to work obviously. Now, extract that to a person you don't like, like Bill Gates for instance (or Linus, we're equal opportunity bashers here;).
If you had enough people and wanted to equate the words "Sorry Software" with either of the above, you'd just have to get enough people pointing that phrase to the page you want associated with it. like so:
let's say you wanted this page:
http://www.microsoft.com/billgates/default.asp
associated with this phrase: bad software
to effect a proper search bomb, you have to have a number of these contextual links pointing to the page in question:
bad software
now, if there are enough people doing this, or enough pages with this specific contextual link on it, when people search "bad software," the Bill Gates page should show up near the top position, if not the first...
as for practical applications, there are none, unless you are trying to make fun of another, or perhaps associate a site with a particular phrase for branding purposes (that's actually pretty practical, but it may be difficult to accomplish).