Most serious entomologists will have a collection of some form, sometimes photographic only but usually of actual specimens.
The reasons for taking specimens are manifold. Identification is the main reason, this forum is filled with threads where a specific identification is impossible from a photograph of a live specimen. Microscopic examination or even viewing an insect from several angles is possible with a dead insect, not so easy with a live one. Close up examination, in addition to identification also allows a more fundamental experience-being able, for example to examine a fly eye at 40x magnification at your own leisure and appreciating the beauty of it is something only available in a second-hand, limited version with photography. Knowing the correct species name helps with recording schemes, with many under-recorded species being a reflection of where the recorders are than where the insect is. There is also an artistic side, the pinning out of a specimen is a difficult skill to learn, the pinned insects can be used for display and/or study (and are particularly useful in a teaching context), although expect mixed reactions to the dead bugs on your wall!
As to the ethics, I've not much more to add than HarrassedDad's first paragraph. Avoid collecting rare species if possible (although evidently the rare ones don't advertise that fact in any way), and avoid gravid females where possible, and make some provision for your records to be used in some way-either by sending them to a recording scheme or to your local Wildlife society. Insects have a reproduction strategy that allows for a lot of redundancy (in other words, they produce lots of offspring because most of them won't live to reproduce themselves). Leif mentions several scenarios, and I'll add pesticides, parasites and fungal infection, all of which kill millions of insects every year and habitat loss is a far bigger killer (all the more so when you consider some of the habitat lost recently could possibly be protected on environmental grounds if a better understanding of the local entomology was there). The taking of one or two insects is a very, very small impact on the overall population.