What is an Alternate Setting? Example of device that needs them?
The USB spec has a lot of talk about them, but never tells what one is and - most importantly - why I would use one. I never saw a USB device that uses alternate settings.
Alternate setting is used to provide the advantage of having two configurations on the fly even though the device has only one configuration.
The alternate setting of a USB interface is define by the bAlternateSetting attribute in the Standard Interface Descriptor. A USB interface with an alternate settings can be used in two mode. For example a USB interface endpoints may act as INTERRUPT pipes in normal settings, but might act as BULK pipe in alternate settings providing you the facility of two different mode on the same interface. You just have to send a SetInterface request to activate a settings. I myself didn't have to use it much though. And I think normally device drivers don't tend to use it as I couldn't find out any example driver.
You can look at this link for more details.