This is done to stop HF noise from spreading through the VCC rail. The VIC and the 8701 clock generator (U31) run at much higher speeds than the rest of the C-64, and thereby generate more HF noise than the other components.
My understanding is that it's called "CAN +5V" because it supplies the components in the shielded metal "can" on board.  Note that the RF modulator -- the other HF component on the board -- also sits in a metal can, and also includes its own regulator (bottom left portion of the modulator schematic on p. 39 of the service manual you linked to).
The bridge rectifier used in the generation of the +5V CAN supply ties the lower end of the AC input to one diode drop above GND. This is not a problem with the original Commodore power bricks, where both supplies (+5V DC and 9V AC) are floating, with no reference to an external ground (like PE). Even when you attach an external device (floppy drive, monitor, printer, whatever) that has its ground tied to PE, the ground of the 5V DC supply will be tied to that ground as well, but the 9V AC will still float.
If you're thinking about building your own supply, ensure that its AC output also floats with respect to the 5V DC.
 I remember this explanation from back then, but I can't give a source. I checked a couple of books from the time, and they all use the term without an explanation.