WP Engineer has a good post online recounting the usage behind my-hacks.php and its disappearance in 2.8 in terms of being an option to select.

http://wpengineer.com/my-hacksphp/

All sites that used myhacks.php will still work considering it's just a UI change.

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Meh, it doesn't serve any purpose anyway. May as well make a plugin to do that or just add the 'hacks' to your theme.

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I've never really understood the purpose of My Hacks. Seems like anything that could be done with myhacks could just as easily be done with a plugin, with the added advantage that it would be the "proper" way of doing things. Interesting that they're not removing support, only the UI. Maybe it's just an intermediate step.

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I never understood it either but it seems to me like you could just add custom functions to a theme functions.php file or just the functions.php file itself.

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The my hacks file is just a leftover from the olden days, before plugins and such were well supported. There's no need for it anymore. Using a custom plugin for your hacks makes much more sense.