Retains soil moisture. Provides food and shelter to beneficial soil organisms such as earthworms. Breaks down into soil-building humus and nutrients with the help of the soil organisms it provides an environment for. Prevents weeds from taking over. And weeds that do happen to grow through the mulch are easily pulled out.
Weeds are the earth's bandaids, who quickly move in to cover up any bare soil.
Don't encourage them by providing them with the right conditions. Prevents soil from splashing onto plants. Plants with mud splashed on them look bad. And, the soil can often carry spores and diseases that then get splashed right onto your plants. Not a good thing.