Picasa Web Albums is the central repository for all the photos uploaded to Google's services: Blogger, Google Buzz, Orkut or upload a background image for Google's homepage. Unfortunately, Google creates many albums cluttering the interface. For e.g., Google Buzz creates a new album every time you upload one or more photos. Picasa Web addressed this issue by grouping all Buzz albums in a special gallery called "Photos from posts".
Buzz isn't the only service that adds albums: Blogger creates albums to store photos uploaded to your blogs. Picasa's albums aren't a good way to organize photos because they've limitations, you can't store same photo in multiple albums and individual photos don't have privacy controls.