All other terminals on Linux generate Ascii 127 when pressing the Backspace key, and correspondingly set "stty erase" to ^?. (They may let you alter it, e.g. gnome-terminal does in its "Compatibility" preference tab.) Terminology generates ^H and sets stty erase accordingly.
Although I can't come up with any use cases right now where it causes problems, I'd bet there are some (e.g. when ssh'ing to a remote machine). Doing it differently from all the other terminals is asking for trouble.
See also https://bugzilla.gnome.org/show_bug.cgi?id=157448 comments 8-10.