Corporations and many other businesses can use this type of letter as a precursor to a formal agreement. In it they can list the salient points of their intentions and what they intend to include in formal contractual agreement if both parties can come to an amicable agreement. Thus it can be used as a fall back document should any questions arise during the final contract negotiations. A good example of this might be a letter sent to a company's investor explaining their intentions to buyout another company and what it is expected to do to the value of their stocks.
If your most qualified prospect submits a Letter Of Intent that includes a lower price and more generous terms than you had wanted or a less qualified buyer has submitted a more attractive LOI, then now is the time to negotiate with the stronger prospect. It's almost impossible to improve the deal once you have accepted (by signing) the Letter Of Intent. However, the buyer may find reasons to re_negotiate a lower price during the due diligence phase.