The RAF define close formation as "no closer than 1 x rotor span" and it has no tactical use as such, it's normally only for ceremonial purposes but excellent for honing a pilot's confidence in himself and his machine.
It can be done safely but it requires proper training, briefing and currency, even for high-time pilots. Things can go wrong very quickly, especially if the leader isn't considerate of his wingmen.
The Kuwait collision illustrates the dangers. Note that the two aircraft involved in that tragic accident were from two different units and there had not been a proper face to face briefing. I spoke to one of the pilots a couple of weeks previously, although I have no info on how much formation training and experience they had.
Having done it, I can't recommend formation GCA approaches in very poor weather - but it certainly concentrates the mind when all you can see is the other tailboom and anti-coll light!
Night formation using NVGs is also very "interesting" but that does have its uses, for example I have carried out night air to air refuelling from a C-130, as I am sure a few other contributors have.