A few of things went into my decision:
* Somewhere on this board, someone posted a cost/benefit analysis of the various models of the 2011 iMac. I was undecided re: bigger monitor or better processor. The analysis convinced me that the better value was in more screen real estate. This getting more bang for my buck was a major factor.
* I'm in the media business. I expected to do some work-related page design at home, so the bigger screen would be more useful. (Of course, after I bought it, I learned that the company was divvying up duties and that I'd be exlcusively doing content editing and no page design, so ...)
* I have a backlog of personal digital images to edit. Bigger is always better.
* Multitasking is really nice with a big screen. I can have a browser open and display my bank account info at full width while I have a spreadsheet open at full width next to it, and I still have room for a reduced second browser window (for instance, for a credit card website), calculator, iTunes and Stickies note or two. I'm not hardcore enough in my computing needs to warrant multiple monitors, but I have found the extra real estate to be useful.
* This didn't go into my decision, but for the first time, I watched a DVD movie on my iMac over the weekend. It really was a nice experience to be sitting the typical distance away from a computer monitor (about 3' for me) and watch a movie on that large of a screen.
On the downside, it can be a strain on the eyes to browse the web, and I have to set my text documents to a fairly high magnification. I'm a combination of lazy and busy, so I haven't had/made the time to tweak my settings make life much easier by setting eye-friendly preferences. Maybe this weekend, but there just might be some Cheezits that need to be eaten instead.
As for a reference point, I upgraded from a 20" G4 iMac (iLamp), so for years I was used to having a screen size very close to the 21" option.