A hardware radio switch has security benefits to it in that when it is off, you know for a fact that nothing is connected to your laptop wirelessly. The radio switch usually turns off all wireless communication, including Bluetooth and 3G.
I have heard that this is a requirement in certain military environments, but I have not seen any evidence that this drove the development of the feature on any laptops.
The physical button is not just to disable the wifi, but it should actually power off the device hardware.
When you disable wifi in your settings, the device is still powered up and using some power. It may not be a lot of power, but when you are commuting, every little bit helps. If you really want to save maximum battery life, then you want it to be consuming zero power.
Not for aircraft safety
Contrary to a commonly held belief, it is not for travel on aircraft. The FAA regulations apply only during takeoff and landing (and even those are currently being reconsidered). If this were a requirement for safety, every device allowed on an aircraft would have to have a hardware button - including mobile phones, tablets, and ebook readers.
Additionally, the rules for takeoff and landing specify that the devices themselves have to be turned off, not that the transmitters have to be turned off. So a switch would not comply with the current FAA rules on takeoff and landing.
Source: I am an electronic engineer with specialist courses in communication and wireless transmission. I have also taken a graduate level course in safety and security specifically in air transportation.