You're confusing two different situations, as referenced.
A pilot on an IFR flight plan may request VFR-on-top in lieu of a hard altitude, if operating in VMC. Pilots may opt to do this for a variety of reasons (and, as Hold West said, it's an underutilized option). The pilot's responsibility to see and avoid while in VMC remains exactly the same as if he were at a hard altitude -- and he continues to receive ATC services, and can revert to a hard altitude at his request.
For IFR departures -- at pilot request -- a controller may issue a clearance to climb to VFR conditions on top (handy for climbing through coastal stratus, for instance); in this case, the controller issues a clearance limit and alternate instructions (and the reported tops) -- the expectation being the pilot will cancel when reaching "on top," and will proceed under VFR.
VFR-on-top operations pose no impediment to other traffic -- quite the reverse: requesting VFR-on-top can expedite your own flight, and others.
<edit to add my personal favorite use of VFR-on-top: departing IFR from an airport below the radar environment. You taxi out for takeoff, and tell ATC "requesting VFR-on-top; we're on top now." And, wah-lah! "Maintain VFR-conditions-on-top, cleared for takeoff." Traffic is issued as appropriate, everybody gets to keep moving, and you can shortcut an onerous departure procedure. It's a beautiful thing.>