when to use the expression "hanging from the rafters?"

Solution 1:

In addition to Robusto's literal answer, "[people] hanging from the rafters" is also a hyperbole one can use to mean "very crowded" or "standing room only". While it is unlikely to have frequently been literally true, the idea that people would sit on or hang from some element of the roof's support structure (on horizontal beams or joists rather than up-angled rafters) to see the goings-on is not out of the question, and can be seen in old (perhaps staged) photographs, films, and paintings.

Solution 2:

This is a normally positive expression, referring to the practice of hanging the jerseys of retired stars (usually in basketball) from the rafters in the team's home arena. From NBA.com:

Check the site for the complete list, which is too long to copy. Also, Google gives dozens of hits talking about retired players "hanging from the rafters."