It reduces the amount of data; also the relative noise level in the result is lower.
Histograms are an example of data binning used in order to observe underlying frequency distributions.
Data binning may be used when small instrumental shifts in the spectral dimension from mass spectrometry (MS) or nuclear magnetic resonance (NMR) experiments will be falsely interpreted as representing different components, when a collection of data profiles is subjected to pattern recognition analysis.
For example, in NMR the chemical shift axis may be discretized and coarsely binned, and in MS the spectral accuracies may be rounded to integer atomic mass unit values.
Also, several digital camera systems incorporate an automatic pixel binning function to improve image contrast.