The external hard drive is for doing full-system backups of my entire laptop. I create a full mirror of the entire laptop every 2 weeks (using CarbonCopyCloner). The backup is bootable, which means if my laptop was stolen, or my laptop died entirely, I could walk into an Apple store, buy a new MacBook Air, and then boot from my backup and immediately have my entire system back the way it was, all in a matter of minutes.
Now that you can buy a 256GB SD (Memory) Cards (the size of a quarter!), I actually don’t carry around any external hard drives anymore. Now I just have a couple of high-capacity SD Cards and I do full-system backups to those (and use them for storing large files I don’t need to access frequently).