TL;DR: traffic leaks, performance, brand cohesiveness
YouTube wasn't built with your best interests as a site owner in mind. YouTube's embed player was built to make people watch more YouTube. This means that the free player is optimized for siphoning visitors from your website. And with a finely-tuned arsenal of "related videos", links, and buttons, YouTube is pretty darn good at it. A side effect of this bloat is that YouTube's player takes 12x longer to load and buffers 8x more often than the SmartVideo player.
SmartVideo keeps your visitors on your site and focused on your content with no distracting logos, icons, "related videos", traffic leaks, or colors that don't match your branding.