They keep your customers/members up to date with what's going on, and can act as a means of getting news about new products or services across in a friendly way to those people who will probably be interested. The European laws about spam apply of course, so don't send newsletters to people unless you have first given them the chance to opt in to your mailing list.
Many peoples' email clients will prevent any images being displayed unless they (the recipients) choose to enable images in specific mails, so remember that. In addition, html emails can look uninviting in the display pane of Outlook when all image content is disabled. A plain text mail with a hyperlink to a web-based newsletter is an excellent idea, and many companies are choosing that method now.