This card is a principal component in many useful combos which revolve around combinations of itself, "D/D Swirl Slime", and "D/D Necro Slime" to successively summon a number of potent "D/D/D" Extra Deck monsters in a single turn. The most significant combos are explained here.
This card will not be banished after it is special summoned if it is used to Xyz Summon. If "D/D Berfomet" is on the field, you can use its effect to change "Lamia"'s level to match "Berfomet"'s, and Xyz summon with them. Since Berfomet's original level is 4, this easily opens up access to useful Rank 4 Xyz Monsters.
While this card's effect allows it to be special summoned from the hand, it may be more useful to normal summon this card (or special summon it through another card's effect, such as "Swirl Slime"), and so that you can use it to synchro summon twice in one turn.
For example, if you have a Level 6 monster on the field, normal summon "Lamia" and use it to synchro summon "D/D/D Gust King Alexander". Then, send a card from your hand or field to the graveyard to special summon "Lamia" from the graveyard and tune it with "Gust King Alexander" to synchro summmon "D/D/D Cursed King Siegfried".
"Lamia" can also be special summoned from the graveyard by "Gust King Alexander"'s effect (if you still have methods of summoning additional monsters), further emphasizing how important it is to not use Lamia's effect until you run out of other ways to special summon it.