Recompiling the kernel may be necessary to take advantage of hardware you have that may not be "turned on" or compiled in the stock kernel that came with the distrobution you isntalled. In some instances, it would be adventageous to compile modules for your hardware (i.e.; network cards) directly into the kernel. Addintionally, some software you may want to use might require your kernel be compiled in a specific fashion (i.e.; cdrecord with ide cd-burners).
For security purposes, recompiling the kernel will help you close potential holes from modules or features that you may not ever use.
Finally, if you are going to try the "latest" kernel from kernel.org (instead of waiting for your distro to put out their version), you will have to recompile the kernel source you download.