When it comes to most “normie” use cases in Linux (and I am including the self hosting community here as well), people prefer working on well established and supported distributions such as Debian, Ubuntu, CentOS, Fedora, etc.
Generally, people would discourage the use of bleeding edge distributions like Arch, Gentoo, etc. as it might break something if the user doesn’t know what they’re doing. Yet, I have seen instances where this has been used by hobbyists and companies. (ChromeOS is a Gentoo corruption, and SteamOS is an arch derivative).
What about Linux from Scratch (LFS)? Under what circumstances would one want to build Linux from the ground up for production or commercial purposes?
I’d say “under no circumstances”. When building for production, you want to build on a stable foundation. LFS isn’t that, it’s an educational tool. It does not result in a maintainable, robust system. It requires tremendous amounts of work to keep it secure and updated: there’s no package manager, no repository you can pull from, no nothing. You have to build an entire distribution on your own. Outside of educational purposes, I’m having trouble to imagine any situation where that might be a good idea.
No, not even embedded. There were always distros targetting embedded systems, LFS was never a good choice there either. It was much more straightforward to strip down - say - Debian for a limited device, than to build something from scratch for it. (I spent a few years building and operating embedded Linux systems at the early 2000s, we built it on a stripped down Debian.)