Real current output limit of linear regulators vs. heat dissipation
Good question.

Almost always, what damages things is heat, not current. The answer to your question is in the difference between local and global, or between sub-parts and the whole thing. The current may go through several sub-parts, and each one of them may have different power ratings. A bonding wire may have, by itself, a dissipation limit that is way below that of the whole device. A series sub-part, that needs to be there for whatever reason, may have a dissipation limit lower than that of the main sub-part. For instance, because it has a small volume, and a small surface in contact with the rest of the device, and cannot put out heat at the same rate as the main sub-part. In cases like these ones, it makes sense to specify a limit for the current, even after having specified a limit for the total dissipation, because those little, "secondary" sub-parts may not be able to dissipate heat at the same rate as the device as a whole.

Just an example. Imagine the situation in the following figure. The power rating for the whole device is 5 W. It would look like operating the device at \$V_d\$=2 V and \$I_d\$=1.5 A would be within safe limits, because \$P_d=V_d·I_d=2·1.5=3\$ W &lt; 5 W. The global heat dissipation would be below its corresponding limit. However, \$I_d^2·0.1=1.5^2·0.1=0.225\$ W > 0.1 W, so that small sub-part would be exceeding its local dissipation limit, and hence the need to specify \$I_{dmax}\$ in addition to \$P_{max}\$. But the key is that, even for that current limit, the real reason behind it is heat, not current by itself. Except for a few cases (like electromigration), current by itself does not directly damage anything.