Kawasaki, C., Nugent, J. K., Miyashita, H., Miyahara, H. & Brazelton, T. B.
(1994).  The cultural organization of infants' sleep. Children's Environments, 11(2), 135-141.

Samples of both urban and rural Japanese infants were studied.  In Japan, all infants sleep with their parents until the next baby comes along, or at least until kindergarten.  In rural areas, it can be even longer.

It was found that cosleeping infants scored higher in the ability to respond to visual and auditory stimuli when awake than similar American newborns, and they also scored higher in the ability to ignore negative stimuli when sleeping.
It is believed that this balance of sleep and alert states contributes to the maturation of the central nervous system during infancy.
 

In other words, cosleeping helps your child develop healthy sleep-wake patterns, and helps the central nervous system to develop properly.