It's about avoiding situations where your work and your personal life are in conflict ("conflict of interest") and many employers ask you to sign such a thing.

It's about avoiding situations where your work and your personal life are in conflict ("conflict of interest") and many employers ask you to sign such a thing. If you're not working on something similar to what the employer is working on, it's not a problem. If you're working on something that will compete with what your employer is doing, there's a problem. If you were running a sports team, you wouldn't let your employees run a betting parlor - they'd have too much incentive to throw a game and profit off it. In the same way, employers don't want their employees having situations where the company's goals and the employee's goals are at odds.