Races also give balance to the game. The same can be said of classes and skills. If players are allowed to min/max their character to the extreme the game would become either too easy for the min/maxers or too difficult for those that don't know the system well enough to take full advantage of it.
Other methods can be used for game balance, but for the reasons Kavir mentions I think races and some sort of class and/or skill system work the best.
The other reason I see for coded races and classes/skills is to provide the player with multiple experiences in the same game. If you master the game with one character you have the option of doing it again with a different set of advantages and disadvantages.
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