What is the reason for U/L bit in MAC address? Or is it solely for identifying if MAC address is locally generated or not and technically it is not used anywhere?
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Ref IEEE 802.3 section 3.2.3 Address fields
The second bit shall be used to distinguish between locally or globally administered addresses. For globally administered (or U, universal) addresses, the bit is set to 0. If an address is to be assigned locally, this bit is set to 1. Note that for the broadcast address, this bit is also a 1.
Administered is the keyword here. You, as a network administrator, are responsible for using nodes with unique addresses in the broadcast domains of your network. Using ready made NICs (with build in MAC addresses) is easy (the manufacturer takes care of unique address assignment), but if you assign your own addresses, you may not be sure you are globally unique. That's what this bit says, you are out of the way of globally assigned addresses and take care of unique assignments in your broadcast domains.
