Repairing armor and weapons didnt "add" anything to the gameplay in real terms. Players just ran around with loads of repair hammers and repaired after combat, making the system kinda pointless. Thats my take on it, and I think one shared with many others.
This is actually both incorrect, and correct.
Repairing as it was handled in Morrowind/Oblivion was just for the sake of having the Armorer skill. It really didn't add anything to the overall game. But fast forward to Fallout 3, and repairs have become an integral part of the game in three particular ways.
First, and this is possibly something that is intentionally limited to Fallout; repairing placed urgency in situations which helped fortify the "Survival" themes of the game. The unique requirements to repair weapons (Field-strip similar weapons for replacement parts) lent itself to the Fallout mentality very well.
Second, and this is where Skyrim should have taken notes; Repairing in Fallout 3 provided a necessary form of currency destruction. Players in all Bethesda's games are essentially unlimited loot-generators, and every item you buy and sell devalues the next gold or item you get because of inflation. Repairs in Morrowind/Oblivion didn't correct or curb this in any way, but Repairs in Fallout 3 and New Vegas did (Particularly New Vegas). Had Skyrim used the smithing system to repair equipment with the raw materials, a similar effect could have been gained, and maintained the relevance of in-game currency as rewards.
Third, and probably the most important; Durability on equipment was another dimension in determining how the player's horizontal character growth curves. Again, New Vegas accomplished this in a most impressive way. By allowing players to buy weapons like Brush Guns or Anti-materiel rifles early in the game, but making those weapons very costly to maintain at such levels, it gave more depth to equipment choices and a layer of tactical planning that is more-or-less lacking in Skyrim. Furthermore, durability can help differentiate material types from one-another, similar in practice to Morrowind's material balance. Glass armor may protect nearly as well as Ebony, but it wears out much faster.