There's a few reasons why I do it:
1. Most of my chapters are quite large. Keeping them in one file means editing chapter seven, for example, would be a task. Never mind opening the thing to begin with, considering my computer tends to lag when I try to do things like open massive documents. Or, in shorter terms, it's easier to open and search.
2. I submit to Fanfiction.net, where each chapter needs to be kept separate due to the way its system works.
3. Keeping every file separate serves as a bookmarker. I have easy access to what material is ready to be posted or reposted, so I can just use the hot keys (namely, CTRL+A) instead of going to the middle of a document, hitting shift, and pressing the down arrow for awhile until I finally get to the end of what I want to repost or post. This helps particularly in that I usually have a good part of the next chapter written by the time I'm ready to post the one before it.
4. Gizamimi Pichu would murder me in my sleep if I sent her fifteen chapters in one Word document to beta every time I finish a chapter, and it wouldn't make too much sense for me to create one massive document and fifteen smaller ones when I can just have the fifteen smaller ones (that I need anyway for FFNet) in one folder and keep everyone happy.