If being able to use your Android phone for a Wi-Fi hotspot (without paying an additional fee to your service provider), being able to backup your data, and being able to run a stripped down version of Wireshark weren’t enough I have yet another reason, security.
Take for example this security exploit. It’s fixed on Android 2.2 but not 1.6. What’s the big deal? Many carriers and handset manufacturers haven’t pushed out the 2.2 update to older phones meaning many phones are now vulnerable with no hope of a fix in site. Unlike a personal computer a phone generally can’t be updated willy nilly. For example I can’t go to the store and purchase a new copy of Android to install on my phone, I have to wait for the manufacturers and carriers to push updates out to me.
How does rooting help? Rooting (at least unlocking the NAND) allows you to install custom ROMs. ROMs are basically the installation of the operating system. Many phones that have seen obsolescence from their manufacturers and carriers have updated custom ROMs available for them. These custom ROMs are maintained by the Android community and can offer updates that otherwise wouldn’t be available. If you have a rooted phone with an old version of Android you may want to see if there are any updated custom ROMs available out there. Sadly this is the only way you’ll probably see a fix for any current and future vulnerabilities.