Having difference sizes and colours makes it a LOT easier to sift through your wallet and find the notes you need, instead of needing to examine each note to see what it is, a cursory glance will tell you.
The notes here in NZ are quite purty, although they were recently changed and are now being printed on a polypropylene polymer, which took a bit of getting used to, but it makes them last much longer, and it doesn't matter if they're in your pocket when your pants go through the wash
http://www.rbnz.govt.nz/currency/money/0060617-01.html