When you're writing code for someone else. For example, I was once involved in the creation of a rigid web application framework that should be customizable for our customers. One important request was that the customer could hire a designer to modify the templates without having to be able to program. Even more important, he might not be authorized to change the code.
Smarty for example allows to implement quite rigid restrictions on what the template may do. Basically, our application disabled all but the most basic code constructs and a selected set of modifier functions. So we had two goals that were served well by a template engine: simplicity and security.
