I've found that without backgrounds, characters end up being just a bunch of numbers on a piece of paper with no personality. I don't require pages and pages of background, but I like having
something so that the character is less one-dimensional.
I also like to mine my players' character backgrounds for plot hooks so I can personalize the campaign in order to get my players more emotionally invested in it.
For my current SWSE campaign, I kicked things off with a character creation session. I told everyone that they had been Separatist mercenaries during the Clone Wars and thus all knew each other, and that they had been drifting around the Outer Rim for the past three years leading a very
Firefly-esque life. I got them to build their characters together in hopes that it would improve their teamwork, since they normally just go off and build their characters in complete isolation with no thought to what anyone else is making (my group is not good at teamwork or party tactics). Most of them went along with that, but one of them wanted to play a Clone, while another wanted to play a Jedi ... but they managed to work it all out brilliantly. The Jedi lost his master during the Clone Wars (and I took that hook and made it so she hadn't actually died and was in fact the Jedi Master they would find fairly early on in the campaign) and had defected to the Separatists afterwards, while the Clone had refused to carry out Order 66 and had been thrown into the same prison as the Separatist PCs, and then they all escaped together during a prison riot.
During that session, I attempted to apply the Spirit of the Century character creation method, but the players got a little confused, so for all subsequent PCs that have joined the campaign (either new players' PCs or existing players' replacement PCs), I just require a paragraph or two of background covering where the PC comes from, who their family is, what they've been doing, whether or not they participated in the Clone Wars and so on.
The most important thing for me, though, is the character's psychology. I get each player to give me at least one thing their character Loves, Hates/Dislikes, and Fears, and at least one thing that Motivates them. I got this from GM Chris over on the d20 radio forums. So far, it's worked really well. It's given me lots of juicy hooks to work into the game (not just in terms of making someone a PC's uncle or whatever, but also in terms of presenting moral dilemmas and putting the PCs into awkward situations to see how the player reacts and so on).
Also, I don't require that the players reveal all their character's background to the rest of the players, so there can still be elements of discovery (at least for the other players) during the campaign.
At the very least, it gets my players to think about their character as a character and not just a bunch of numbers on a piece of paper. But I find that it also helps me personalize the campaign, which is a good thing.
If anyone's interested in looking at the backgrounds my players came up with for their PCs in my current SWSE campaign, you can check them out on my campaign log site:
Absolut Dawn.