It’s for people who have fuckloads of windows and applications open at the same time, like me <_>
I use multiple desktops to homework, mostly. Having Word or Visual Studio in any state other than maximized bugs me out so I have a separate desktop for that with the assignment details or program specs on another. And I switch between them using [Ctrl]-[Win]-[Right] or [Left]
Some people separate their IM stuff and browser windows into other desktops as well.
To me at least, it’s much easier to work with instead of [Alt]-[Tab]ing through a long list of open windows the time. I remember falling in love with Spaces on Mac OS X when I used it years ago, so having it natively on Windows makes me happy.
(Not to say that having separate desktop icon arrangements wouldn’t be super cool, though. o: *writes a note to Microsoft*)