If you are studying for BSCI exam and own the cisco press certification guide just re-read the section on ospf.

Router ID - obviously the name states its an identifier meaning it can be used for your own documentation purposes and such. Also in network logs/events shows which router generated alerts/packets and would refer to the Router ID - such as the ospf database with LSAs.

Two major use of Router ID in OSPF comes to mind: 1) Virtual Links 2) Tie Breaker for DR selection if the priority is the same (default priority of 1).

Virtual links - http://www.cisco.com/en/US/tech/tk365/technologies_tech_note09186a0080094aaa.shtml

The admin can manually set the router id through CLI. Else (most common cases) the router will choose the highest loopback ip address as its router ID. If no loopback interface exists, then it will choose the highest IP configured at a physical interface.