This by itself might not seem to warrant $99, but the MobileMe service itself is actually quite nice. I don't love that it has an annual payment, but if I add a contact on my pc, it automatically syns with my mac, iphone, and hackintosh (whether it's in win7 or OS X). It also does this for calendars, which is extremely useful for me. I know google has a similar service for contacts and calendars, but being able to open up an actual app on my computer (and not rely on the internet, which I think google's is web-based?) is a huge advantage for me. Also, 20GB might not be enough for many users, but for my purposes as a college instructor, posting tutorial videos for my students is invaluable -- and being able to sync them in an easy manner with iWeb, etc makes things very easy.
Oh, and lastly, MobileMe it has a "find my iphone" function, so if an iphone is ever stolen, you'll know exactly where it is.
Can you do all [or most] of these things with other applications / 3rd party software on a PC? Absolutely! But, Apple's integrated method does work surprisingly well here -- if you have need for the majority of its functions.