The nature of their stealthiness makes them a bit hard to define. In essence, it is when companies decide to cut headcount without having to announce layoffs. They will likely give the associates X number of months/weeks to find a new job, and the firm may even couch the reduction in performance evaluation terms, making those let go doubt their legal skills.
When are they used:
Every now and then. However, they are most common during economic downturns. To avoid making a splash, a firm reduces overhead without signaling weakness.
Why are they awful:
You are the problem, not us. Stealth layoffs are intended to convey this message. Attorneys who suddenly lose their jobs often have never had a negative performance review before. Despite their history, the firm decided to cut them, regardless of the fact they would continue to receive good performance reviews during good economic times.