The biggest benefit, IMO, to splitting a hard-drive into multiple partitions is two fold: (1) data recovery and (2) reinstallation.
Say you keep your OS on one partition and your documents on another. If you're OS gets toasted and you have to reformat, all your files on the non-os partition are still there. Or if you just want to reformat because you've had a computer for a few years and installed/uninstalled tons of shareware, spyware, i.e., garbage -- you can reinstall on just the OS partition leaving your documents fully intact.
It's been my policy to do this ever since a few of my friends almost lost all their files because windows 2000 gave them the BSOD during boot.
Random Tip #1
Incidentally, if for some reason you can't boot your OS...try a Linux Live CD like Knoppix to move your files to safety before you reformat.
Random Tip #2
If you do have documents on a separate partition, read this article about how to move the target of my documents: http://support.microsoft.com/?kbid=310147