It's all about meta-data.

Prior to the overwhelming popularity of digital photography, people wrote information on the back of their prints/polaroids. Things like "Josh, Age 4" or "Family reunion" or "1992." They did this because after taking a photo, and unless the camera burned the date and time on the photograph itself, the exact date and time of the photograph was lost. This was a reasonable system, because compared to today, people took considerably fewer pictures (How many used to be in a roll of film? 30? 40? Certainly less than the 500+ that fit on my camera today.), and developed their film much less frequently as well. Only a few good photos would come out of a roll, and those would get thrown in a drawer, or a folder, or maybe a photo album, and forgotten about.

Fast-forward to modern day, where digital cameras rule the world, everyone carries a camera phone in their pocket, and Star Trek was rebooted with hyper-tight lighting and lens flare and nobody walks anywhere. Embedded in every single photograph are at least thirty unique values embedded in every photograph. They even go so far as to assign your photos GPS coordinates so you know exactly where the photos were taken. This is for a few reasons:

• Computer programmers and data archivists / analysts (like myself) wanting to make use of cheap storage to better and more conveniently document each photo, or to be able to see in aggregate how photos are being taken (ie, Flickr's camera stats (www.flickr.com)).
• People's expectations that they will probably never have a physical copy of 99% of the photos they take.
• People now take an incredible number of photos, and need ways to manage them that cater to people's a) laziness, b) lack of interest, and c) lack of time.

So, Picasa and iPhoto make it brainless to organize your photos by date and "event," giving you the ability to sort, collate, preview, color adjust, edit, crop, collage, even send off your photos to make a printed book. Faces are just the next tool with which to organize your photos, an extra "tag" that your computer can easily work with to provide you a slightly more human-friendly way to deal with your photos.

It also gives you the ability to find fun and strange things about your photo collection. Like, why in the world do I have 300 more pictures of your fiancee than I have of myself, and 400 more than anyone else in my collection? Or, among the 150+ people that I tagged, who never appears in a photo with another person (and raises suspicion that those two people are the same person)?