They want to lose lvls so they stay in range of certain mobs that drop good stuff(or they are bots that want to stay in spoil range).Drops are best if the mob is white/green to you!
There are few reasons.
They are either dwarf scavengers who want to keep themselves around the level of certain mob, so their spoils work more often.
Or they are using Manor System and outleveled big batch of seeds they really want to sow to earn money.
last 2 posts explain most of it. When u are killed (by anything) you lose experience, lose enough experience and you lose a level, then you are back into optimal farming level that they want. If you see the tonnes of dwarfs doing it and their names are random keystrokes (JJklkjnn) then they are the "evil" farmers (cant say the B word or might get locked)
And beside stated above options, there is one more point - getting more SP. Some classes have really lack of SP to learn all the spells their want, especially if someone try to be clanleader ) Leveling clan takes great amount of SP.