Many theories - some say compact handles better while standing (including esteemed frame designer Tom Kellogg), others complain that it's just a way for bike manufactures to make a smaller number of frames (e.g., S, M, L, XL vs 50, 52, 54, 56, 58, 60).

The rationale recommended to you is as good as any I've heard - you can get a large compact frame but still have enough standover to not wreck the family jewels.

I have both classic and compact framed bikes - I like them both.