So you can more acurately determine the direction the needle is pointed at. With better quality compasses the dial and needle are designed so that the user can see the needle (actually called a pointer) and the dial at the same time with the pointer over top of the dial. read more
So in more precise compasses, a pointed needle is required, but in cheaper, less accurate compasses, an actual pointed needle is not really needed, but most manufacture do it anyway, mainly because it looks better. I have seen some compasses that do not put a point on the needle. read more