Electrical Isolation
There are several reasons why you would want your signals to be electrically isolated between devices.

The main reason I usually think of first is different ground potentials. The simplest way to think about this is if you are connected 2 nodes of a network together that are using different ground references. I have one real life example that I have personally dealt with. We had 2 computer network switches that were connected with a CAT5 cable in 2 adjacent buildings. The ground potential was different enough between each switch that it caused the ports being used to stop working.

Another extension of my previous example is being able to protect a failure in one device to not damage the other. This could be from a current surge, or static, or many other things.

Another reason is to limit the noise in one system from working its way into another system.

And one final reason that I know of is to help prevent electrical shock, especially in marine environments. There are certain items on a boat that will come in contact with water that have a good chance of having a voltage on them. You don't want salt water to be shocking anyone.

There may be other reasons, but this is my extent of knowledge.