Competitive cyclists don't always think about this. But one of the biggest and most important things about riding as a form of transportation is being seen and being able to see other people... and lighting helps. This is largely an American problem, mind you, because we think bikes are either toys or for racing and forget that we don't actually need to drive. But lights are important for people who bike like me.
Now, I know what parts cost, largely because I play with this sort of stuff for my art. And when I look at the stuff in the stores, I realize that I'm paying a fairly huge markup. Because what you are getting is about the same level of sophistication that a waterproof flashlight has, with some customized bits and bobs so it'll mount. We're talking several times the cost of parts when you get done. This is absurd. And they don't even do a very good job at it most of the time.
The law in California says that I must have front and back reflectors, either reflective sidewalls or reflectors on the wheels, and pedal reflectors, plus lights in front, if I want to bike at night. I tend to think that the benefits of reflectors are a little overrated, given that they require the other driver to have a fully functional set of headlights and for the headlights to be shining in the right direction, but they are probably still good for extremely degenerate bad conditions, like if your light fails. Also, even though getting hit from behind is fairly rare, I still think rear lights are also a good idea.
In my opinion, we're not yet at the point where a person can have too much bike lighting. Light does two things for you. First, your front light lets you see what's in front of you. Second, front and back lights make you visible to other people on the road. I suspect that there are even some advantages to having a blinky light in front and back during the day.
The way things used to be, you'd have either a battery that went in one of the waterbottle cages or a generator on the bike. And it would power a few watts of incandescent light. And it would be expensive. Then LEDs got decent, so you could get a decent light in a small package.
The base technology is pretty much there. However, even though the technology is there, most bike lights suck, cost a lot of money, or both. What I'm seeing the most is that corners are cut in the wrong places. So the battery clip fails. Or the button comes off. Or it's not quite watertight. Or the driver circuit is poorly designed, so even though it's got a 1W Luxeon LED, it's actually fairly dim. Or the lens puts all of the light in a little spot in the center so it fries your retina over easy if you look directly at it but doesn't distribute the light much outside of that tiny spot, thus making it useless for navigating at night or being seen.
So between poor lens design and poor driving circuitry, even if you have a state-of-the-art super-bright LED, you can have an astonishingly dim light that isn't reliable. I've been let down often enough by lights that I tend to think it's better to carry a backup. So I have two lights in front and if I could get one of the lights that is both a reflector and a light and white for going in front, I'd have a third front light, just like I've got a third back light.