Blogs are a great way to improve search engine rankings, but more importantly they are a superb way to involve your users and really develop some lasting connections.
From a search engine perspective blogs are usually very content rich and very optimized where the site can be crawled easily. They usually contain new and unique information which helps greatly with obtaining high quality backlinks.
From a user perspective blogs really help connect with users at a more personal level and make the company or person much more friendly. They no longer appear like some huge company or corporate expert and it really helps create a large audience of evangelists.