One is that it gives you shorter term goals to work towards. It can also be used to make sure you are on track with your training, a measuring stick of sorts. Most people respond to this effort = award model.
One thing that I have always liked about the belt system is that it encourages respect for others, regardless of social standing. People from all walks of life study martial arts. The belt system removes all that outside 'stuff'. It doesn't matter if you are a neurosurgeon, a soccer mom, a cop or the CEO of a major company, you show respect to others for their knowledge and skill in the chosen art. The millionaire takes instruction from the out of work artist. This dynamic is rarely found in other walks of life.
Whether or not it's true, you also have to like the idea that the coloured belt system came about from martial artists studying an art for so long that their white belt darkened from years of hard work, sweat and tears. By the time your white belt turned black, you were a master.
That's a brief look at what's good about the belt system. In a future post, I'll discuss what's not so good.
See here for the bad