This is VERY unfortunate "feature" and should be turned off in my opinion.
As it let anyone use other people domain names for any purposes. Anyone can create an account, put some malicious or any other content and instead of displaying it under own domain name it can be linked from ANY other domain name that is hosted on the same server - very bad in my opinion, very bad.
Just for an example (a dumb example). I'll write something bad about John's girlfriend and I'll send her an email "Hey, look what I did for you, check chemicalservers.com/~account/greetings-for-my-sweetheart/, kisses, John". (let's say I am a "funny" friend of both of you and I know the address) Until you'll explain a situation - you've got at least temporarily troubles. No offence - just dumb example of what can be done by anyone.
No-one except Piotr should have possibility to manage content under foos.pl/ANYURL
No-one except Paul should have possibility to manage content under paulrokicki.com/ANYURL.
No-one except John should have possibility to manage content under chemicalservers.com/ANYURL
etc. This should be turned off. Really.
Or if this is very helpful for you - at least kept ONLY on the direct IP address, so you can use 1.2.3.4/~accountname, but NOT domain/~accountname. But better not at all in my opinion.