The configuration allows you to give multiple TACACS+ server. The normal operation is that they are queried in the order given and the first server to respond is taken, independent of the answer (positive or negative).
This means that the user database has to be consistent over all the servers.
The "directed-request" feature allows use the use of separately administered TACACS+ servers with different user information. With this enabled, the user can login as "user@server1" instead of "user" where "server1" is the tacacs-server to be used. This server must be one of those configured by "tacacs-server host".
There was a bug in the IOS that had the effect that "tacacs-server directed-request" was in effect only when "aaa authentication local-override" was also configured. CSCdi64804 solves this in IOS 11.0(10.1) and 11.1(5.1).