There's no better sight that a big, fuck-off red cloud of smoke emerge on the scene and engulf the crowd. Its eye-catching and naturally creates excitement - it builds atmosphere.
For those that don't know, for years British gas used similar smoke bombs to check if chimneys were clear when installing new gas fires. Engineers would light a smoke-bomb, if it dispersed up the chimney you have a healthy stack, if it bellowed back down your chimney needed something up it. So they have lost of uses.
However, I'm also a bit surprised at how vehemently people are defending their use. Besides the obvious burn issues of the flares as outlined eloquently by yorkykopite and indeed many others, the inhalation of the smoke from the smoke bombs and flares is not completely harmless. Tell that to people who have severe respiratory issues and who is to say the the small particles aren't harmful to health in the long term.
They are absolutely fucking ace, I love seeing them, buts lets be adult about the possible wider context of regular and deep inhalation.