This is the key to a lot of visual design tricks and creativity.

In a C2 track the lighting is usualy set at the the very start of the track text file. It only lets you specify the directional and ambiant light that will be applied on every material. Which is not much at all considering all the lighting settings that you can set in Plaything 2.
Without using the FULL LIT TRICK the game will only use the ambiant and directional lighting specified in the text file and the diffuse color. If you use the trick the game will follow the settings you set in Plaything2 for each material! This means diffuse color, ambiant/directional lighting, specular & specular force. Spending some time on the material settings can make a lot of difference ingame (visually). Lights become real lights because they are full lit now (logical you say). Chromey stuff, pipes and shiny things can be shiney now (high specular). It is possible to combine env mapping with diffuse lighting and special material settings to achieve very precise visual concepts. You can make different types of material react differently to the ambiant light or the directional light. Or create color schemes and work on the atmosphere of your track to give it more life or constitency in your track concept! (what I did with the last TDR Arena revamp for example)

So! How to make use of this trick you ask?
Well ages ago, people (probably Cesm/C2S/ChevyII) noticed there's one thing that isn't affected by the global lighting: the powerup materials. Then the easiest way is simply to create a single dummy powerup which you'll place totaly out of the track (usualy far under the track). It is needed to make it unreachable because all the "special" materials would be back to default if the powerup was activated. It can ofcourse be used as a trick too, activating a powerup would turn off all the lights in a track for example. Anyway back to the dummy itself: it must not be an empty dummy as we'll apply every "special material" to a triangle of the fake powerup. Have a look at this, this is what I use to easily sort them out and see which material is already activated via the full lit trick, it is a simple plan which I estimates the number of subdivisions based on the amount of needed "special materials" (easy to do in Max):



And here's an example (above). You can see most of the exterior materials are shady etc. and the corridor is full lit.
The FULL LIT TRICK might theoricaly also allow the use of textures with baked lighting and shadows. Making them full lit (read shadingless) would prevent the highlighted parts in a texture to be darkened or darker parts to be highlighted ingame. One can imagine a room in the nuclear silo where the light is green and is diffused in a very particular manner. Just get rid of the normal lighting by using the full lit trick and bake the green lighting you want in the textures. 3D programs like 3dsMax can bake shading and highlights into textures directly.
Another use is making hard shadows. No need to duplicate textures and make one darker. Just duplicate the material and use the lighting settings to make one darker (no specular, high specular force and low a/d lighting) then apply it to the triangles defining the shadow and to one triangle of the fake powerup. It can be done without the full lit trick by using diffuse color (cold/warm black/dark grey) but the global lighting would still be applied on it and it might look weird at times: addition of the black diffused color and the global lighting shady area (shadows aren't supposed to be additive), while in the case of the full lit trick there's no addition of shadows or anything, just a specific lighting set to define a shadow.

Unfortunately, applying a funk on one of the materials using the full lit trick will disable it.
By the way it is a good idea to place the dummy powerup apart from the rest of the powerups and even at the root of your track hierarchy just to access it easily and not be confused with something else. You can even rename it into a powerup just before the preprocessing.

To resume the idea of this trick: using the FULL LIT TRICK lets you specify a specific lighting for any material instead of the global lighting.