It would make sense if it had T9 built in, but it doesn't. So why?
They should really implement that btw. I know it exists in custom roms.
I would assume it's because there are still phone numbers that are distributed with convenience letters (e.g. "phonewords") in them, and there are probably still automated call answering programs that use them. The letters on the numpad far predate T9.
For the US specifically, Wikipedia also has an article that explains the history of telephone numbers and the various ways that letters have been used over time (it was different in other countries, but I can't find a detailed article for that at the moment).
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You can search your contacts easily by "typing letters".
The dialer instantly interprets the input phone number also as text input (just like T9 does) and shows contacts that match below the actual number.
For example if you want to dial Smith you should dial 76484.