- Prototype a concept without having to buy parts or solder anything.
- It would be a fun game to make fake robots fight each other or solve problems. It could be better TV than "Robot Wars" because there wouldn't be any safety limitations! (You could apply price or weight limits for different robot classes.)
- Get your prototype actually built since the virtual one is essentially assembled from real parts.
I realize it seems like an insanely complicated thing, but there's already basically all the physics simulation that's the hard part, making realistically inaccurate sensors is mostly trivial by comparison (though doing things like lasers flickering at an invisibly high frequency coupled with light sensors or large volumes of flowing water could be tough - it wouldn't be that hard to simulate adequately but it would be hard to simulate in real-time. But for non-human-controlled robots that's fine, you could simulate it slow overnight and play it back real-time the next morning to see what happens.)
It seems like if such a product existed it would likely lead to vastly faster development of all sorts of useful automation. A lot of people like to solve problems or make cool things, but we can't all afford the hardware to experiment.