An aspiring writer friend of mine composes all of his fiction in the first person. The character is always an "I", not a "he" or a "she" (or an "it", or even a "they", but I digress). I've been more mutable than that: The Four-Day Weekend was first person, but Summerworld and Tokyo Inferno were third. Why the differences?
I asked myself that question the other night and, much to my surprise, got a surpassingly simple answer. If the subject of the story is a natural storyteller, then it makes sense to let them tell the story in their own words. If they're not, then it makes sense to reclaim storytelling duties from them and tell the story in your words, as an author.
Reason #2 is when you, the author, are trying to impart a bigger view of events than he, the subject, can possibly provide on his own. Sometimes you're trying to comment on what he's doing; sometimes throw it into sharp relief; sometimes just look at it as objectively as you can without letting his voice get in the way.
Feedback on this thought, of the non-electric-guitar non-Merzbow variety, is welcomed.