I thought every1 explained in their own words so let me try to narrate wikipedia:P
http://en.wikipedia.org/wiki/Close-ratio_transmission
A close-ratio type of transmission is designed to allow an engine to remain in a relatively narrow operating speed. Alternately, a wide-ratio transmission requires the engine to operate over a greater speed range, but requires less shifting and allows a wider range of output speeds. Close-ratio transmissions are generally offered in sports cars, in which the engine is tuned for maximum power in a narrow range of operating speeds and the driver can be expected to enjoy shifting often to keep the engine in its power band.
A race is driven at high speed, close to the top speed that is achievable with the car's engine power. The speed has to be reduced for taking turns of various curvatures. Within this range of racing speeds, it may be useful to have many gears to choose from in order to always operate near the maximum engine speed.
Race cars do not have to deal with stop-and-go traffic, intersections, frequent stops, parallel parking, or climbing steep hills at slow speed. Race cars are also not called upon to perform fuel-efficient cruising at low RPM. Consequently, it makes little sense to have gears that support these driving situations at the expense of insufficient gear ratio variety for the intended use, and for this reason, a conventional 5-speed transmission would effectively offer too few useful gears in the race situation. After being used briefly at the very start of the race, the first two gears would never be used again. Moreover, the highest gear could even be too high to get the car into its top speed on a long, straight section of the course. The highest gear should be such that it allows the top speed of the car to coincide with the engine's peak power RPM, where the engine power is just sufficient to fight air drag and other sources of impedance.
The wide gear ratios may also simply be too far apart for fast acceleration, due to each successive gear dropping the engine RPM too low. Suppose that a given engine's power band lies between 7000 and 8000 RPM. Shifting up from a 1.20 gear to a 0.9 gear drops the original RPM by 25% (reducing it to 0.75 of the original rate). That is enough of a drop to take the engine out of its power RPM zone. For instance, if the shift is executed at 8000 RPM, the engine falls to about 6200 RPM, where it will generate a lot less power. The climb from 6200 will be a slow, labored acceleration. By contrast, shifting up from a 1.15 gear to a 1.0 gear represents only a 13% drop in engine revolution speed. Executed at 8000 RPM, the shift will achieve nearly 7000 RPM, just at the low end of the example engine's power band, allowing the car to continue accelerating quickly.