The rationale is that if you are, say, SCUBA diving in Paraguay, and there's suddenly a revolution or an earthquake or something, the State Department will know that you're one of the people who they need to evacuate. Or, if you go missing, and your relatives call the government and express concern, they'll know where to start looking.
(That was a joke. Paraguay is one of a handful of landlocked nations that has no coastline, and there's no place to SCUBA dive. But you get the idea)
The foreign service still does help travelers abroad who run into problems, though perhaps not to the degree that was once the case. I suppose it makes sense to notify them if residing abroad or for shorter stays in an area prone to flare ups. In the past when I traveled internationally for work my employers had worldwide security coverage and I would certainly rely on them before relying on the government. Today I'd rely on friends. In either case they can call the G if a situation should arise where it would help.
