One of my DMs has a richly detailed campaign world with well-realized NPCs and organizations, distinctive cultures, and a many-layered history. He is also a prankster at heart and loves secrets. Which means that socially interacting in his world is a series of social traps that are set to have us stumble into trouble, upset NPCs, or at least have us humliate ourselves. I ran a social bard/rogue in his game and I used my maxed out Know(local) check constantly. I was always checking to identify who we were talking with, their reputation, how certain acts are regarded culturally or legaly, checking for loopholes in deals that we were about to arrange, other NPCs we would upset if we went along our course of action, significant hollidays of the year for this culture (and what happens if we don't participate,) likey buyers and sellers of certain items (which grants a bonus to my diplomacy check when making a deal, or allows us to make a deal in the first place,) recent history within the last few years or even months. This is information that would not normally be volunteered by the DM. Generally we were treated like mushrooms: kept in the dark and fed bull[biscuits]. Every time I happen to ask the right question and make the know(local) check, I was able to scoop off some of those bull biscuts off of the party. Although with all of my efforts I know that I have been somewhat helpful, the nature of the DM's game is that we still get surprised by social *gotchas!* and in general I felt like we were that car in the car commercial that is just spinning around in circles through an icy parking lot. We were power that we were not able to engage. What's our AC vs. cutting remark? What's our save vs. backhanded insult? There was a certain point where his game was so soulcrushing that I quit.
Although this DM does what he does to a frustrating degree, in moderation it is a good way to make the local knowledge skill relevant and valuable in a game. Don't just give away facts, have the PCs dig it out of their own head. Set social situations up so that the obvious way to deal with it is not the right way. Have an NPC that likes to work loopholes in deals they make with the party. Or an NPC that is very difficult to deal with, but with a little known reason why, and an even littler known way of placating him. Set up situations where the PCs could accidently break a social taboo. And then set it up so that knowledgable PCs could evade it.