Server protocol:User ID
UID's consist of alphanumerical characters and can (not must!) theoretically be used at any place where you use a nick name. The first 3 characters identify the SID of the server where the user is on (this is part of the UID) and thus a UID will always start with a digit.
The benefit of using UID's is that it really uniquely identifies a user regardless of the current nick name. This allows us to solve some long-standing problems where nick collisions and race conditions that cause desynchs such as 'ghosts' in a channel.
:One NOTICE Two :Hi there
:001AAAAAA NOTICE 002AAAAAA :Hi there
As you can see, it doesn't necessarily shorten the length, that isn't the purpose of UID. The benefit of UID is the uniqueness described earlier.