The first is increasing Engagement particularly with richer content.
Here are some studies I found that point to whether this worked. It's a mixed bag.
This one shows mixed results for engagement and pageviews: Attention USA
And this from Mashable: Fan growth slowed after timeline introduced ... but did it pick up again after people got used to it?
This study suggests some positive impact for marketers - Simplymeasured.com
- 14% Increase in Fan Engagement 2. 46% Increase in Content Engagement 3. 65% Increase in Interactive Content Engagement (Video and Photo)
This study suggests little impact: allfacebook.com
However here is a rebuttal: jonloomer.com (Basically proposing that timeline could impact on the things that matter - more visits and more engagement with apps)
I can't locate it now, however I recall seeing another report that found a decrease in interaction with wall posts (of the user's friends) via timeline. However this is far harder to find as the emphasis has been on marketing impact for logical reasons.
Bottom line: The results seem positive but there isn't a strong consensus yet
The second reason is Encouraging a different level of sharing
Note: I chasing the source. I'll locate this and support with references
The summary is: By representing your domain as a timeline you would be encouraged to share more about your life. Even going back to the days before facebook if you could be bothered. I also heard it was to tap into an emotional connection.