“It has long been assumed that pubic hair is a remnant of a furrier period in our evolutionary history, and that the real question is why the rest of the body lost its hirsuteness.” New Scientist August 2009.
Many theories exist to explain its existence, but as yet there's no generally accepted explanation.
Here is a (lice related) theory from Robin A Weiss at the Division of Infection and Immunity, University College London. (Journal of Biology, 2009, 8:20
Note: Pubic hair is not uniquely human. Most other mammals have it - it's just that the other parts of their bodies are hairy too