The two main reasons for a virtual drive are speed and convenience.
Speed: Once you have ripped an image of your CD to your hard drive and mounted it to a virtual drive, it essentially becomes a 200x CD drive. If you're playing a game and it has to load a cut scene or something, it will be much faster than reading it from disc.
Convenience: If you have the hard drive space, you can mount several images to multiple virtual drves. That way, you always have your CDs handy, and never have to swap discs.