Backward compatibility - you could run an application that uses generics, introduced in Java 1.5, on a Java 1.4 VM. At the time that was pretty amazing. These days, with so many backward compatibility-breaking changes being introduced, it doesn't feel so great.
That was the original plan, but it never worked in my experience. The compiler as shipped required that -source 1.5 use -target 1.5. So hobbling the language this way served no benefit in the end.
