More advanced motion controls like Galil, DSPMC, etc can actually make use of the encoder signals to do electronic gearing and all the fancy stuff that the big name CNC controls do. The reason they can do so is that all real time the motion control stuff is done in dedicated hardware designed for that purpose. PCs stink at real time motion control but they are great at reading big CNC files, path planning, and user interfaces. Dedicated motion controllers suck at reading large files, the complex path planning that goes with then and user interfaces but they are great at motion control. Using PC + a motion control card gets you the best of both worlds the big name CNC control guys figured that out more than a decade ago.
*Hi - my name is sam and I am an emc person.
hi sam 
Emc2 actually does that. It uses a realtime extensions to the linux kernal. The external hardware used by emc is 'dumb' in effect. All the hardware does is count encoders really fast, output high frequency pwm, switch i/o and or output high step rates. No motion control is done in it. So - you don't need expenive hardware to do real closed loop. Motion control, trajectory planning and such is all done in the pc. That is why emc doesn't work with the motion cards like galil - emc wants to be the one in control. Internally the stepper setups are actually closed loop. It is just that the step generator feeds the info back into the motion control itself. Some have actually unhooked that virtual connection within emc and hooked in encoders as feedback. (that is also the reason why stepper machines that are not configured correctly will get following errors with emc2 - throws people off initally)

As far as 'why you would ever want true closed loop'
My following error is .00016" peak right now - what is yours?

I can estop the machine without rehoming.
while the servo drives are disabled I can move the machine around without it loosing its position.
The machine will go into estop if my following error is greater than the amount I have set.
The dro is displaying actual machine position - not what it thinks the position is.
(I am sure there is more but it is early)
BTW - because all the big stuff is done in emc - electronic gearing can be done also - so rigid tapping, gear hobbing and the like are possible. (gear hobbing is sort of a expert level configuration though...

)
emc was built on the philosophy 'sense, model, act'
Mach is great software. I just like to expand the conversation.
sam