The main city reps...Darnassus, Stormwind, Ironforge, and Gnomeregan...allow u to buy things from vendors for a lower price with higher amounts of rep. The more quests u do for the race that is aligned with those cities the higher your rep becomes and the less u have to pay for things from vendors.
As well, u can buy mounts from cities that are NOT your racial city if you get up to Exalted with the city from which u want to buy a mount. I'm going to be working on getting my Human Priest up to Exalted for Darnassus (if possible), so she can ride on a kitty.
Those other Faction groups that Demon mentioned are mostly higher lvl areas u go to. You get rep with those groups to gain the ability to buy things from their 'specialty' vendors. The higher your rep the more stuff u can buy.
I THINK that you can get more quests from them, too....but not sure.
-Foesmite