Using multiple monitor setups on your computer allows you to see more information at once, you can have multiple programs open and accessible at the same time, and seriously cut down on the amount of time spent switching between different tasks.

Productivity and Multi-Screen Displays Study

A study undertaken in 2003 called “Productivity and Multi-Screen Displays” by NEC Display Solutions, University of Utah, and ATI Technologies showed categorically that users who utilised multiple display systems experienced significant productivity increases.

“The study reveals multi-screen users get on task quicker, work faster and get more work done with fewer errors editing documents, spreadsheets, and graphic files in comparison with single screen users” said Dr. James Anderson, professor at the University of Utah’s Department of Communication.

The report also found that ...users increased their errorless production by 18%... ...users found it 39% easier to move around sources of information....

Microsoft Research Article

Microsoft have also spent time analysing how effective multi screen systems can be for end users and have a nice article on their site about it: "Two Screens Are Better Than One" by Suzanne Ross.

From the article: Give someone a second monitor, let them use it for while, and then try to take it away. It just isn't going to happen...

Seeing Double: CodeBetter.com Blog Post

Another, more informal study about the benefits of multiple monitor systems is available to read on the CodeBetter.com blog here: Seeing Double: An Unbiased View on the Benefits of Multiple Monitors

From the blog post: On average, people would much rather have 2 smaller monitors than 1 larger monitor. Nobody answered that they preferred 1 monitor over 2 even a little bit.