I don't understand. What can you do with a UMD that lets you accomplish more than digital distribution?
Well, for one I can swap out at any time without having to download anything. One other is example is while I was travelling I had to sit in London Heathrow airport for about 9 hours, I passed by the HMV (video, music, games shop) picked up PSP game and a UMD anime series (Gankutsuou), and right there on the fly I was able to enjoy my newly acquired media. I didn't have to find a place that I can connect via PSP (which is not always possible, especially not in public hotspots) and I didn't have to wait for a massive download. If I had a PSPgo I would have been stuck with whatever I had put on it before my trip, with no option of acquiring new media until I managed to get a steady internet connection that the PSP could actually use (which, following this particular trip, was about a month later).
The presence of physical media just makes life on-the-go so much more convenient, which is a little ironic considering digital media doesn't occupy any physical space. We're just not "there" yet in terms of portable media and wide-scale connectivity.
Honestly, I really wish Sony would revive the MD format. I just don't understand why they killed it.