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Little known feature of the loot system, added, presumably, in late WotLK along with the group disenchant roll, thus making it little known in 3.3.5 addon development circles. It allows the server to change the displayed item in a loot slot at will, updating it for everyone who has the loot window opened. On retail it was most likely used to replace the item with disenchant results (dust, shards), if the disenchant roll winner failed to accept the item (e.g. full bags). On my private server it was also used to facilitate AoE loot with items from multiple corpses stacked together and looted partially.
Newline at the end courtesy of github's web editor, I did not put it there, and I can't remove it - it forcibly adds anyway.