I've never (in three times of completing the game in HC) found it necessary to sneak, but it CAN help you out at times.
It's always easier to pick your enemies off one by one than have them all whacking at you at the same time. And it's certainly easier if you're close to magic-using creatures before they can start casting all those nasty spells on you.
I've found two or three points in this skill very helpfull, more however is overkill. (well for melee chars anyway, if you're shooting arrows or setting traps it's another story)
