What does 'set -e' do, and why might it be considered dangerous?

This question has appeared on a pre-interview quiz and it's making me crazy. Can anyone answer this and put me at ease? The quiz has no reference to a particular shell but the job description is for a unix sa. again the question is simply...

What does 'set -e' do, and why might it be considered dangerous?

set -e causes the shell to exit if any subcommand or pipeline returns a non-zero status.

The answer the interviewer was probably looking for is:

It would be dangerous to use "set -e" when creating init.d scripts:

From http://www.debian.org/doc/debian-policy/ch-opersys.html 9.3.2 --

Be careful of using set -e in init.d scripts. Writing correct init.d scripts requires accepting various error exit statuses when daemons are already running or already stopped without aborting the init.d script, and common init.d function libraries are not safe to call with set -e in effect. For init.d scripts, it's often easier to not use set -e and instead check the result of each command separately.

This is a valid question from an interviewer standpoint because it gauges a candidates working knowledge of server-level scripting and automation

From bash(1):

          -e      Exit immediately if a pipeline (which may consist  of  a
                  single  simple command),  a subshell command enclosed in
                  parentheses, or one of the commands executed as part  of
                  a  command  list  enclosed  by braces (see SHELL GRAMMAR
                  above) exits with a non-zero status.  The shell does not
                  exit  if  the  command that fails is part of the command
                  list immediately following a  while  or  until  keyword,
                  part  of  the  test  following  the  if or elif reserved
                  words, part of any command executed in a && or  ││  list
                  except  the  command  following  the final && or ││, any
                  command in a pipeline but the last, or if the  command’s
                  return  value  is being inverted with !.  A trap on ERR,
                  if set, is executed before the shell exits.  This option
                  applies to the shell environment and each subshell envi-
                  ronment separately (see  COMMAND  EXECUTION  ENVIRONMENT
                  above), and may cause subshells to exit before executing
                  all the commands in the subshell.

Unfortunately I'm not creative enough to think of why it would be dangerous, other than "the rest of the script won't get executed" or "it might possibly perhaps mask real problems".