Somebody mentioned that they use RP to find out information in town, not a simple skill check. That's all well and good, however--the question is, how do you determine how good a character is at figuring out the right people to talk to?
The first level of this is that it is unfun to spend twenty minutes having the DM describe all of the characters walking past you on the street, followed by you sidling up to them and saying "Hey, you know where the black market is around here?", and dealing with the reactions which vary from "He glances back and forth suspiciously and says 'Not here--ask Krothar down at the Pig and Whistle'" to "She pulls her child closer to her and hurries on" to "His demeanor turns to stone as he says 'You, sir, are going to have to come down to the kennel with me to have a little talk with our Master of Hounds.'"
So, you might say, well "I'll describe the scene to the players, and they'll tell me who they want to approach." But that's just it--it's not the players who are deciding who to approach, it's the characters. In my opinion, the best way you want to handle things in this kind of scenario is to have the characters' streetwise skill determine how you describe the scene to them. If they do well, you provide more details that make it clear that the first man is rather furtive and would be best approached in a less public venue, the woman is a matron out shopping and not likely to be of help, and the second man walks like someone in authority. If they do really well, they might get a bonus on their Diplomacy or Streetwise check to talk to the woman (who does in fact know something about the local black market, as her child is chronically ill and needs contraband medicines), or see that the furtive man is talking to someone who darts north down an alleyway (and couldn't the characters just head that way without talking to him?), or note that the man in authority is probably connected to the law and not to the local mob (and provide a bonus when trying to convince him that they want to find the black market because they're looking for someone, and not because they want to buy.)
So right there you have some great uses for Streetwise. Diplomacy is good, too, but Streetwise is what lets you size people and situations up in an urban environment.
A person without Streetwise skill is going to be less effective--they'll talk to the wrong people, and take longer to come up with an answer at best. At worst, they'll talk to the really wrong people, and then somebody had really better be good at Diplomacy!
The PHB description of spending time to "just know" is the short form--and it has its appropriate moments, too: if you're all well known in this town and know it well, there's no need to play out every part of the interaction. In that case, picking which man on the street to talk to is just as distracting as talking to every single person who passes by. It slows down the game when things are moving quickly, and distracts from the action. Better in that circumstance to say "After a little hunting around, you find out that Jimmy the Knife definitely knows where your quarry is hiding." (This without having to specify where in town you're looking for people--you Just Know.) And then you have the choice of whether you want to "automatically" shake down Jimmy or have that be a bit of an encounter (where somebody else can apply Diplomacy or Intimidate.)
So, that's my take on Streetwise, at least as far as a social skill: In an area you're not initimately familiar with, it provides the tools for assessing the roles of people in the community, making it easier to find out what you need to know, locate the kind of person you're looking for, or negotiate your way quickly through the paranoia of gang culture to reach a person on the level where Diplomacy will start being actively useful. In an area you've been operating for some time, it represents your knowledge of the local street scene and your ability to find what you need or get in touch with the movers and shakers very quickly. At epic levels, pretty much any adventurer can walk into a bar in a random frontier town and shake out what they need without real effort--but the same things that were hard in such a town at low levels are still hard when knocking about Sigil or the City of Brass or what have you.
One thing I would say is that Streetwise applies to the life of the streets, not the life of nobility (except in a borderline or highly egalitarian society.) Streetwise doesn't help you interact with the king--or gain an audience with him given you're speaking to one of his nobles. But it could help you gain access to his captain of the guard (who may be a noble (diplomacy to continue) or may be a commoner (streetwise to convince him to pass you on to a noble.))
Lots of options.
On the less social side, as people have noted, Streetwise is a survival skill. It tells you where you might be able to steal clothes after escaping from naked confinement in a cell. It tells you "Trust me, we go down this alley! Don't ask me how I know, I just know that other one's a dead end" when running from local thugs in a new city.
In short: If you spend much time in the lower social strata of urban areas, this skill is indispensible. If you stick mostly to higher social strata you'll be better served by Diplomacy. If you stick mostly to more rustic areas, you'll be better served by Nature. And of course, if you spend most of your time developing a health Sunrod tan, you'd be better served by Dungeoneering.
