Highlight Tone Priority (HTP) changes the exposure settings used by the camera to ensure that the highlights are not over-exposed. This is especially helpful in strong daylight pictures with lots of detail in the highlights. A great example of a time to use it is a daytime wedding in the sun, when you are trying to get the details in the white wedding gown.
The downside of using HTP is that the picture will basically just be under-exposed. This is perfectly fine if your image is generally high key and low contrast, but if you have a high contrast image, then your shadows will be quite under-exposed, which will increase the noise.
I believe the reason that ISO expansion would be disabled is that the ISO is internally modified down a bit to lower the overall exposure.