I'm curious as to why this is something needed with the way xenForo deals with permissions. I can totally understand it being useful on other software such as phpbb, but not xenforo.
Because let's say you have a group for just XFMG and 3 membership tiers.
You could clone one two times that basically have the same settings and change just the upload quotas (Maximum allowed storage (MB), Maximum file size (MB), Maximum image width, Maximum image height) in all 3 tiers to allow for maximum storage of 10 MB, 100 MB, and 1000 MB; a maximum file size of 4 MB (medium quality like 8-megapixel photo) to 50 MB (high quality, and for the next options); a maximum image width and height of 500 or 0 for the other two (for unlimited, allowing for 8-megapixel+ images while the first tier is only 1/4th a megapixel).
Easier to clone the free one twice and modify just those 4 options than copy each one by one, potentially missing one.
And yes, how XF groups work, they could be a member of all 3 and the 1000 MB would take precedence, but, they could also just be a member of 1 too. Either way, you'd still need 3 separate groups in a tiered system.
Now, multiply this by features you'd like to offer on your site in different tiers, say signatures for instance...
The banner isn't much of an issue as you can create 3 user groups and it modify the banner only (I believe that's what
@TheGroove meant), as I create a user group solely for a banner for organizational purposes and to manually apply just the banner quicker (e.g., User group: "Banner: VIP", text "VIP" and the grey style), but harder without memorizing which permissions VIP gets.
Though, instead of just 3 user groups, which also can make sense too, this allows you to easily take away permissions from a VIP (say 3rd tier) for abusing them without going into that specific member and editing their individual permissions when you can just untick the box instead. Say VIP belongs to the user group, "Signature: Three Lines" [Signature permissions: Maximum lines] for instance, but they are using all three lines distractingly with the largest text possible instead of maybe the largest/two lines of normal and you've asked them to stop, but they keep changing it back... you could untick it taking them back to Registered (quite possibly having no signature) or tick the user group "Signature: One Line" instead.
It's applying different features to the 5+ add ons and even forum to those 3-tiers that cloning makes sense.
But it could also be minute things like the signature example as provided. I just think it's more organized using user groups above just 3 groups that are set in stone and then modify the users individually to take/give permissions as you can search for these users by groups, but can't by permissions.
It would make sense on a bigger board than I definitely have (but I am starting how I think it should be so I don't have to start from scratch when I get there
)
tl;dr: User group cloning makes sense if you want to create tiered memberships and allow for taking/giving extra permissions that are searchable as opposed to editing individual users and forgetting about them because you only have 3 user groups (notes are good, but you still would need notes with multiple groups/tiers too)