When wallpaper on the ceiling can actually work

 A well known fact is that white reflects light, which makes the room look brighter and larger. Any other colour the darker it gets start to soak the light in without reflecting as much and therefore the room can look a bit darker and smaller. All depending on the colour, of course.

This is the practical reason why we use white paint on the ceiling, so that visually ceiling height would seem more. If we paint the ceiling in darker colour, the ceiling height visually will decrease.
Same principle refers to wallpapers, however, there are few cases when wallpapers on the ceiling could work beneficially.

Too high ceilings.
Sometimes some spaces like loft conversion bedrooms have a ceiling that is just too high for the space and feels a bit weird. In this case wallpaer can smooth this transition and balance out the space.

Kids rooms and Nurseries.
Kids rooms are usually a great fun to design, as you can create a fairytale. Kids rooms carefully designed, can have wallpaper on the ceiling to go along with the theme, but most probably this is something that will need to be changed later.

Feature parts of the ceiling.
In the rooms with high ceilings and ceiling decor wallpaper can add a splash of colour or rather pattern to the design. I would still advice to use papers with white background to reflect more light. Other interesting space where the wallpaper could be used is to decorate the ceiling above the staircase, as quite often this space is left unattended and a bit boring design wise.