Jon Udell is pointing to column he wrote in 2001 that reviews Jeremy Rifkin's book The Age of Access. In Jon's column, he gives what I think is the most succinct explanation about why digital identity matters:

Rifkin's central theme is simply stated. We are entering a new stage of capitalism. Its defining principle is no longer ownership of property bought and sold in markets, but rather access to services leased within networks of suppliers and users. As consumers, and as businesses, we spend less on one-time purchases, and more on subscriptions to a growing array of services. Many of these services are delivered through electronic networks -- electricity, Internet connectivity, online content. But as Rifkin points out, tangible things -- cars, computers, office buildings, and inventory -- are also "dematerializing" into services. Ownership of such things is becoming a liability, something to outsource.

In a property regime, commercial transactions can be (relatively) anonymous, and are of brief duration. I walked into a local computer store a few months ago, and paid $25 in cash for a PC video adapter. The proprietor might or might not recognize me on the street; might or might not have a record of that transaction; might or might not have any further contact with me. In an access regime, transactions are never anonymous, always recorded, and embedded within a long-term relationship.

One of the prices that we pay for the convenience of using services, rather than owning products, is the burden of repeated authentication. I have to identify myself, every time, to gain access. Whether I do so directly, with my own name, or indirectly, by way of a pseudonym, is a matter of architecture and policy, and will determine whether or how the slippery concept of privacy will govern my use of the service. But the fact is that some real or pseudonymous identity is a condition of access.

I once had an IT director at the state ask me why anyone cared about directories and single sign-on. They argued vociferously that we were wasting our time putting together a master directory. Their day probably involved one authentication to the Novell file server and not much else. In that world, who cares. But in the world envisioned by Rifkin, we could be authenticating more or less continuously in one form or another. I'll let my digital proxy (like my cell phone) do that for me, thank-you very much.