One reason is that different console manufacturers sell their systems at different prices depending on which region they're in and how well they're doing in that region. For example the Xbox 360 is cheaper in Japan than the U.S., Nintendo's Wii doesn't come with Wii Sports in Japan, etc. If there was no region coding it would be much more difficult to lower or raise prices in one region without it impacting greatly on another.
Another reason is the same as the reason DVDs are region specific, and that has to do with distribution deals and intellectual property rights. For example a company may license out the distribution rights to a hit game (say Rockstar allowing Capcom to produce, sell and market copies of Grand Theft Auto IV in Europe - not a real life example just hypothetically). There would be far less incentive for Capcom to do that if they were competing against copies of the game being imported from North America.
There are other reasons as well but it all boils down to console and game manufacturers having tighter control over the distribution of their products.
