Short domains are more memorable.
You can’t really argue with that.
However a lot of registries don’t allow them for a variety of reasons.
The Isle of Man is one of the few exceptions that springs to mind, as they allow pretty much any length, but charge more for the shorter ones.
The Irish domain registry does not allow two letter domains, but will allow two character domains. (There is one two letter IE domain which predates the registry).
In the big bad world of gTLDs releasing the one and two letter domains that are still available comes up for discussion from time to time. Stephane has posted recently about what’s being going on with .mobi and .coop.
The .coop registry has been given approval to release two character domains, while both .coop and .mobi have been informed that their requests regarding single character domains do not pose any issue and have been referred to the ICANN board.
I’m not sure how popular .coop’s domains will prove, but I expect the .mobi ones will be very popular and are bound to fetch very high prices if they are released via auction.
In any case it’s doubtful if mere mortals will be able to afford them! 🙂