To put it simply, whenever I play hardcore RPG's defend is an option to block a heavy attack as if the opponent is charging up for a heavy attack. As it would be "smart" to be on defend rather than hack n slash an opponent that you know that your not gonna be able to knock out before he splashes that huge beam on you. Hope this helps ;)
FlashfireEX
It's useful if an enemy is going to unleash a multi turn attack that would normally kill you (see Epic Battle Fantasy and Zombie Goku's Spirit Bomb).