Having AppleCare on my iPhone last winter meant that a replacement was overnighted to me at Apple's expense rather than my having to bring or ship the phone in for diagnosis followed by repair or replacement. (It would still have been free, as it was still in the one-year warranty.)
Having AppleCare on my (work) MacBook Pro last month meant that on a nearly two-year-old computer, the dead hard drive was replaced at no charge, and overnight shipping to and from Apple was done at their expense. Otherwise, it was out of warranty, so fixing would've been at Cornell's expense.
Having AppleCare on my iPad 2 today meant that a replacement, complete with custom engraving, is being shipped overnight to me, and overnight return shipping for the dead iPad is at Apple's expense, rather than my having to bring or ship the iPad in for diagnosis followed by repair or replacement. (It would still have been free, as it's still in the one-year warranty.)
Stuff that just sits on your desk has a much better chance of outliving its "useful" (technological life-cycle-wise) lifespan. Stuff that goes where you go has a much better chance of needing some repair within its useful lifespan, and AppleCare both increases the length of the repair coverage and makes the repair or replacement way smoother.