Hard Data Racks

Advantages of Racks

Smaller Footprint - You are able to fit more computers into less area.
Close Proximity - it is easier to provide such features as UPS Power backup, Centralized Backup, Shared Raid devices, Power Cycling bars, etc.
Organized Cabling - it makes it easier to organize the cabling.

When are they Used?

Clusters - when building a cluster it is advantageous to reduce the amount of space (the footprint) required by the cluster. A Rackmount configuration gives you the best density.
Servers - Also in situations where you have several servers, it makes sense to use a rack to again reduce the required space.
Networking - Racks allow you to place patch boards, switches, routers all neatly in the same space allowing for organized cabling and of course reducing the required space.
Collocating - Hosting Companies provide rack space or cages in which a rack will allow for more servers.