Yep I'd also agree with the amnesia stories being among some of the best. There was an old game called Deja Vu (1 & 2) that I remember really sucking me in because it used this device.
It's used a lot because it's so useful. It means that the player knows exactly as much as the main character, so you don't have situations where the main character knows something the player doesn't, or vice versa.
Heck, even planescape used this device, for pretty much the reasons I just listed.
For that matter, anyone who hasn't already done so, and loves planescape, should go check
this link. It features some of the original design docs used from when they were making Torment, and they're a great read. (Especially when you realize just how much of them made it through mostly unchanged. Someone clearly had a strong vision for this project, and made it work.) (Warning, some major spoilers, obviously.)
It also features the original, and final versions of the character script involving an encounter with a major NPC (Ravel), and it's fun seeing what DID change, too. Great stuff!