There are three reasons for offering different spindle lengths. You probably already guessed the first, but here goes:
Some bottom brackets are used in a multitude of different cranks. Shimano's UN-72 is probably the most commonly used bb in the world and is offered in spindle lengths from 107-127.5mm in 3mm (almost) increments.
The second reason is that some bikes have unique requirements. DH and freeride bikes often need longer spindles because the frames are wider than xc bikes. This is usually because of beefier chainstays and clearance for 2.5-3 in. tires. This yields a less than perfect chainline (too long) but is necessary for the cranks to clear the frame and/or the chainrings to clear the chainstays. (The bad chainline is mostly a factor in the big ring which is often traded for a bash guard anyway.)
The third reason is that some frames with large seat tubes (1 3/8in.) and/or FS bikes with pivots down around the BB shell limit how far the front derailleur can move proximally or to the inside of the crankset. Longer BB spindles mean a less than optimal chainline (increased friction and wear, compromised shifting on the big ring) but are necessary to get the granny ring out far enough (distal) so the front derailleur can pull the chain down on to it.
Chainline btw, is measured from the center of the seat tube to the center of the middle chainring on a triple crankset, and to the point halfway between the two chainrings on a double crankset. The numbers you are shooting for on a mountain bike is 47.5 mm, but 50mm is acceptable too. It is called chainline because you are shooting for a straight line from the middle chainring to the middle cog on the cassette in back. For a much more complete definition of chainline go to: http://sheldonbrown.com/gloss_ca-m.html#chainline
I hope my explination is not too confusing. I can picture it perfectly in my head, I just can't explain it!
So my next (heh, and hopefully last) question to you is whether a 112.5mm bb will suit a frame with a stock 110mm bb? Is this arbitrary? In accordance with the above explanation should I try to keep the difference between the stock (read: rated) bb spindle length and the replacement bb spindle to a minimum in order to minimize the effect it may have on the chainline, even though I could use any size? I've never replaced a crankset/bb before and imagined that if I replaced the crapola 110mm crank/bb with an XTR crank with 112.5mm bb that there would be a 2.5mm side-to-side play between the cranks, which I figure could stress the ends of spindle when the force of the cranks being pedaled would not only torque the spindle axis (as it should) but also cause a stress from 0-2.5mm in distance from where the inside of the crank is mounted on the spindle end to the frame bb shell (where the spindle is housed, and rotates).
Is that pretty much right? can I use the XTR 112.5mm bb as the replacement for the stock 110mm bb with no ill effects, as long as the shell width remains constant (73mm)?
Geez, you thought YOU couldn't explain what was in your head, lol.