Just like the police require the chain of custody for evidence. They require the knowledge of who all handled a piece of evidence at all times. This way they can verify that the evidence has not been tampered with.

Same logic with getting a computer from someone else. You have no way of knowing what was done on the computer before you get it. You may trust the person that gave it to you and that person may not have done anything with it. Best way I can explain this is to give an example.

Your mom has a desktop that she has used for 3 years and she doesn't want it anymore so she gives it to her son Tim.

Tim's Mom does not know that a year ago, Tim's brother had his friend Bob spend the night. During the night when everyone was in bed, Bob gets on the computer and downloads a bunch of child porn on the computer (he downloads it to a folder that he thinks no one will see and he plans on deleting it before he leaves). He did delete the files before he left. Tim, Tim's Mom, and his brother is unaware of what bob did on the computer.

Tim takes the computer home and starts using it. One day a neighbor is using his computer and looses a file that he was working on and goes to undelete the deleted file. When he recovered his file he also recovered other files too and comes across the files for the child porn. The neighbor calls the police.

Now Tim is being accused of having child porn. He will have a hard time proving that it didn't come from him. He may and probably clear his name but not before spending a lot of money on lawyers and his name ran through the mud.

People do not realize that traces of files gets left on a computer even after it is deleted and can be recovered. The only guaranteed way of making sure the file is gone is to completely destroy the hard drive. The second best way is to use a magnet. The third best way is to destroy the partition and format the drive. When you destroy the partition and format the drive, you have to reinstall Windows. If you just delete the file and clear the trash bin, the file is still on the hard drive and can easily be recovered. Destroying the hard drive is too costly for most people and buying a magnet strong enough to wipe the drive is expensive as well. the cheapest method is to destroy the partition.

Many people do not want to take this step because it takes a long time to do or they don't have the operating system CD. However doing this will prevent the risk from the example I gave above.

Another reason to wipe the drive.

When you install a program, it gets installed in so many different locations. When you uninstall a program, it doesn't completely get removed. Remnants of the program gets left behind. This can slow a system down and causes problems. Windows can also get corruption. By reinstalling, you know you are starting out with a fresh install.