Different reasons for different people. I really like Fog Creek's take: they hire interns because they believe, for a certain caliber of employee, the internship is likely to be their last exposure to the open hiring market. It is the not-so-secret-secret-sauce for how they identify and attract very talented developers.

http://www.inc.com/magazine/20070501/column-guest.html (This is a reprisal of an old JoS post that I can't seem to Google at the moment.)