Panniers put weight on the rear tire, which helps breaking efficiency. They also decrease neck and back strain and the giant sweat marks that backpacks tend to leave. Finally, they give the bike a lower center of gravity, which increases stability.

That said, I commuted for years with a backpack. Most people already have one when they start commuting, so using it cuts down on the start-up costs. Panniers may not be right for you because of cost or because of your bike's configuration. Of course, many just prefer to wear a backpack or messenger bag.