1. Microsoft is trying to protect copyright law by moving some data to a secondary hidden folder. Most .mov and .wmv files will be moved here for this exact reason. Granted, all information in the temporary internet folder is copied into the IE tinhat folder, but notice that there are a lot of files in the Ie tinhat folder that are media based and do not exist in the temporary internet folder. This is called "Assisted copyright protection", so non-savvy users can't start pirating data from the web.
Balls, Temp internet is hidden, full stop.

2. Backup. A lot of employess know how to delete their history trail, but not all of them know about registry editing and clearing a secondary Ie folder. Granted, it's a messy hack, but MS learned that employers wanted a feature that would backup the history/cookies/data of employees that surfed the web. Most common-day admins will expand upon this and backup that hidden folder every hour, since doing so won't hinder the box in a way that would make the user suspicious.
So why is it still a feature of XP Home

And there you have it. No hidden MS agenda to send off that information. No hidden MS agenda to copy that information to their servers. For those of you who have ran an sniffer, you'll see this first hand. None of that data is sent out. Not weekly, not daily, not 'per reboot', and not when a program is in use.
So why is it necessary to hack the registery to erase the paging files on reboot. Why is it that every dasta recovery job I have done has recovered stuf that people would rather not have anyone see? Why can I recover typed URLs? etc,etc.

I ware no hat tinfoil or other.