This command can be used into two different contexts:
1- Redistribution into ISIS
When you are redistributing routes into ISIS, you have the choice to set the metric-type as internal (between 0 and 64) or external (between 65 and 128)
Internal metric are always prefer over external metric
2- Set the MED to reflect IGP cost to the NH on eBGP updates
You are receiving an iBGP update and before sending it to your eBGP peers, you want the MED for that prefix set to your IGP cost to the iBGP peer announcing this prefix.
In this case the IGP can be anything.
This command is not necessary if you are redistributing the route into BGP directly instead of receiving them from iBGP. In such case, the MED reflects by default the IGP cost of the redistributed prefix.
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