What was really neat is that you actually got points for certain things you said to other characters. This gives the gamers an incentive to actually play one way or another. What giving points for actions really does is modify behavior. So I feel that the reason why points are awarded at all is to keep the hardcore gamers from complaining. I just want to see the story unfold in a way I want to but I know that other people might not see it that way. I think that a lot of gamers would actually complain about the "lack of experience" if no incentive was given.
Either way, the more paragon and renegade points you have the more options it unlocks. Which is really cool because it makes you go and talk to everybody to see if you can get more points. It makes you more invested in the story and the characters. Mass Effect is a character driven game which is really awesome. This is really hard to do from a design standpoint. Character driven stories are generally harder to write than plot driven stories. Character development is hard to do in a static environment. What bioware does is actually make this in a dynamic environment which is even more impressive.
I really want to emphasize the point that the Mass Effect series is indeed a character driven story and it is why most people actually play the game. It's really hard to do and they did an amazing job. Remember this point when we talk about the ending of Mass Effect 3.