Mitty

I'm guessing that this would be so that the binding doesn't cover up the edges of the top (essentially cutting off 1/4" of the design). I wouldn't do it that way myself, because I'd worry that my binding wouldn't be exactly 1/4" in the front and then I'd have some of the batting showing. I cut all three layers flush.

I also usually stitch around the perimeter to hold the top/batting/back together, which makes it easier for me. The exact seam allowance doesn't matter, but you want it to be covered up by the binding, so less than 1/4". If it doesn't get covered up you can remove it after binding or use thread that blends in and pretend it's part of the quilting!

You might want to practice on a scrap sandwich. Bindings are tricky.