As noted already, Unicode escapes are actually processed during compilation as a replacement:
Because Unicode escapes are processed very early, it is not correct to write '\u000a' for a character literal whose value is linefeed (LF); the Unicode escape \u000a is transformed into an actual linefeed in translation step 1 (§3.3) and the linefeed becomes a LineTerminator in step 2 (§3.4), and so the character literal is not valid in step 3. Instead, one should use the escape sequence '\n' (§3.10.6). Similarly, it is not correct to write '\u000d' for a character literal whose value is carriage return (CR). Instead, use '\r'.
This aspect of Unicode escapes is not just limited to character literals. For example, the following will print "hello world":
// \u000A System.out.println("hello world");
Another way to get special characters beyond an escape is to use an integer literal:
static final char NUL = 0x0000;
As for their usefulness, for one, because otherwise you'd have to copy and paste special characters or type them in with some keyboard combination. The other reason is that certain characters don't have a proper visual representation. Examples of this are null, escape, backspace and delete. Also code point 7, the bell character, which is actually an instruction for the computer to emit a beep when it gets printed.