Happens all the time in Infoboxes and the like, where you want to be able to parameterise almost all of the display: colours and so forth. Also the various little flag icons you see around the place are IIRC implemented in such a fashion.
That's the parameter of the template, rather than the name, being the result of a template. It's a similar issue, but it removes the risk of four braces at the beginning. You could still have them at the end, but that's not ambiguous: {{a|{{b}}}} clearly means {{a| {{b}} }}, there is no alternative, since the last 2 braces have to be paired with the first 2 otherwise it's not valid code. {{{{a}}}} has lots of possible interpretations (2 of which could easily come up).