We use apostrophes in two situations: 1. To mark where some letters have been deleted in a contraction. e.g. must not = mustn't 2. For the possessive clitic ['s] Why does English have them? Do we need them? Well, to begin with, the possessive clitic is very similar in pronunciation and form to the plural suffix. So using an apostrophe in writing helps us distinguish between the plural and the possessive. But for contractions, the only reason we still use the apostrophes is because that is how it has been done for along time and it has become standard, just like idiosyncratic English spelling. There would be better, easier ways, but now we are stuck with it. But in very casual writing, like instant messaging with close friends, it is very common to omit apostrophes from contractions, just as it is common to omit capital letters and other such punctuation, when the meaning is still easily understood. But only in very casual writing!

The best answer is "we just do." That's all there to it. However, just as many punctuation marks can be understood as representing pauses in speech, apostrophes can be understood as meaning places where something is omitted, in the interest of rapid or easy speech, and the apostrophe allows the written word to mirror the spoken word. We were taught in school, whether it's historically accurate or not I don't know, that the possessive apostrophe is, in fact, just another contraction, in this case for the word "his:" Dan Smith, his book. Dan Smith-his book. Dan Smith's book.