Using individual usernames/password combos allows you to assign access levels, gives some auditing--you have a way to track what user did what change (provided you setup AAA). With just a Console/VTY/AUX password all you get is what time things happened.
Here's a link that helps explain privilege levels, in addition at the bottom of the TechNote are some great links that provide TACACS+/RADIUS support:
http://www.cisco.com/en/US/tech/tk59/technologies_tech_note09186a00800949d5.shtml
HTH
Steve