Why have heater blocks on hotends?
Let's look at the elements and what they do:
The Heater Cartridge (blue) is the device that converts electric to thermal energy to melt the plastic. 30 and 40 W are common.
The Thermosensor (red) is there to give feedback to the mainboard.
The Filament Path (gold) in this area is made up of the nozzle and the heatbreak, it contains the meltzone.
The Heater Block (transparent green) is the mounting for all parts. It also acts as the medium to transfer the thermal energy from the Heater Cartidge to the Thermo Sensor and the Filament Path. It also acts as a dampener for the control circuit.
Now, let's put things together and omit the wires and cold end (and internal geometry of the filament path, cause I am lazy):

Now, the construction gives us several reasons for the shape of the heater block:

Ease of construction. Taking a simple block and adding a couple of holes and one cut allows very fast production.
Maximum contact surface. To get the maximum contact surface to the heater cartrige, the heater block has to make contact along its whole length, dictating a minimum size in 2 direction. The same is true for the thermosensor.
The heater block transmits temperature pretty much radially from the heater cartridge. Because it is metal, the gradient between areas is very low, but it is measureable. These would be the thermal equivalent lines on heating up:


You may easily notice that the temperature lines appear more straight as they come closer to the filament path and thermosensor. This helps to give the filament in the heatbreak and nozzle more even heating and better printing.
The mockup I made has a deliberate flaw though: a change in temperature first affects the filament and then shows up on the sensor, making the temperature in the filament path wobble to the extreme. The Heater Block acts pretty much as a transmitter just as much as a time dilation between the heating command and the pickup.
Because this arrangement is not very good, let's swap sensor and filament path around and look at the same lines.

Now we have a much shorter feedback loop, allowing our printer to react quicker to temperature changes and the filament path also gets heated more evenly. The temperature inside the filament path does change less around the target temperature. The whole block now acts mostly as a distribution medium but also as a storage for heat energy:
Up to this point, we did not take into account a very simple fact: the hotend drains thermal energy via two areas:

The outer surface of the heater block emits heat to the air.
Filament gets molten and extruded.

Factor 1 is simple and here a bigger heater block actually is positive: The thermal 'storage' capacity is dependant on the volume, so goes with $xyz \approx a^3$. The surface to emit heat from goes with $2\times(xy+xz+yz)\approx 6\times a^2$. Plotting a graph of that shows us the square-cube law: the capacity increase for one unit does increase the surface just by a fraction of that, so the storage gets better the larger the heater block is.
Factor 2 is why we need to have a storage of thermal energy in the first place: the flow of filament is not exactly the same all the time. Of course, we have moments of even flow, but we also have moments of low or no flow when the printer moves between parts of the print. This alteration of the drain of thermal energy from the heater block means that if we would go down to a bare minimum size, we'd heat up the block fast whenever we are on a move action and cool as the extrusion starts till equilibrium is achieved again. The more thermal capacity is there to store energy, the less the lack of extrusion will immediately affect the print and the more even the temperature will be in the filament path.
Fast printing?!
How is faster printing achieved with a special hotend? Well, 4 factors are used in hotends meant for very fast or very hot printing:

Longer, more powerful heater cartridge.
Longer filament path.
Extra large Heater Block to even out the temperature changes under extrusion more.
Insulating the Heater Block to the air.

One of the prime examples would be an e3D-Volcano.