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Hey, I wouldn't mind hearing other opinions on unit sizes. My trend in the latest edition is to buy squads at minimum, because shooting is so powerful. For example (forgive some mathhammer) I do play sisters of battle and run repentia's. They now come in units of 5 thru 10. I played them in ten for awhile, and every time someone would take a good shooting unit and smoke them in one shooting phase (say ten space marines on rapid fire, that's 13.3 hits, 8.8 wounds (roughly) no save, dead on overwatch on charge). This meant they never got to charge, even if I had the first turn, and my opponent had a unit in range for a turn two charge. So, I bought them as two units of 5 (I have a priest with them too, so its 5 and 6). I put the 5 in front of the 6 (not much cover but) and now my opponent HAS to decide which unit to shoot at. Sure, he wipes that unit out, but the second will at least get into hand to hand. The same type of logic seems to apply to howling banshees, assault marines, etc. Even regualar tau units seem to benefit from this, as now you can only wipe them out 5 at a time, and they take up the same room on the table. Now I understand I have given 2 VP's instead of one, so it is a trade off, and that second unit of repentia may have charge issues...but at least they're alive!
Anyway, I am sculpting my ratlings, and the same seems to apply to them. The only reason to buy them as one unit of ten instead of three of 3,3,4 is VP's and perhaps force org chart (which to my group is pretty meaningless, a re-roll of warlord trait? meh.)
Okay, obviously a big part of this is my opinion, so let me hear some others.
(PS: strangely, in my Space Leopards I run 10 vanguard vets with a librarian, and 10 assault marines without splitting them...so who knows.)

The biggest reason for big units in the current edition of the game is buffs, which are often quite expensive.

Here's an illustrative example: A squad of ork boyz, ten man, no gear, is 60 points. A single painboy, who adds very little except Feel No Pain to a squad, costs 50. Since optimally FNP only saves 1/3 of the unit, that makes that painboy quite inefficient if you add him to your 10 boyz.

But, if you take the Green Tide (which let me remind everyone is STILL LEGAL with the new FAQ ruling specifically on out of date formations) then that's a minimum of 100 boyz - and the same 50 point painboy now protects six HUNDRED points of boyz for the same price! This gets multiplied by a zillion when you bring stuff like the particularly absurd psychic defense buffs, like (w)invisibility, leading to armies which are primarily a single, super huge "deathstar" unit with as many buffs and character attachments slathered on as the incredibly short-sighted ruleset will allow.

One particular example that just leaves me shaking my head even though it's not that crazy in the grand scheme of things is a mini deathstar using allies from Inquisition, Sisters of Battle and Grey Knights. The grey knights have a power which lowers the invuln save of their units by one (4++ becomes 3++ for example.) Combine that with an Inquisition Henchmen squad, which can contain very cheap Crusaders, who have a 3++ save. Now you add a Sisters of Battle ministorum priest, who automatically allows you to re-roll failed saves in close combat - yaaaaaay, rerollable 2++ invulnerable saves for everyone!

There's another reason as well, which is the reason why I run my Howling Banshees at a very large size (when I do run them) and that's attached characters. With wounds now added to the front unit first, a character with a good save, say, Jain Zar with her 2+ and Eternal Warrior, can tank for a whole bunch of models.

Another reason is if you lack slots. For example each Chaos Obliterator would be optimal when run in units of 1, but each of these eat up a HS slot and CSM don't have a way of otherwise spamming them. This means that every 3 obliterators being fielded this way would require you to shell out another 200 points or so for a bare bones HQ choice and Cultists squads, and Oblits are already expensive as is. Now obviously this comes down to list building, individual armies, formations, etc but it is another reason, and one that GW probably intended originally for large squads.

Also some squads just don't unlock stuff until at larger numbers. most SM and CSM units don't get their max number of weapons unless you go to 5 or 10. Noise Marines feel this one particularly painfully, as they only unlock a Blastmaster every 10 marines or so (I think? don't have the codex with me atm) where they would much rather have it Devastator style (minimum 5 marines with 4 carrying it).

I used to think that the only reason to not run 30 Boyz in a unit is because 30 don't fit in battle wagons and trukks. This edition it's not necessarily Boyz before toyz anymore. Still kinda leans that way but it's good to toss in a few toyz now. Still fir us orks it's most often about delivering the ork''s Swiss army knife into melee with the enemy. Depending what I'm up against and how many points we are playing at I might need to bring more pk to the party. If so I'll shrink the size of the units and add more units.

It depends entirely on the point of the unit as well as any buffs or upgrades.

If I'm running flesh hounds I want to make sure they get to their target and do some damage to distract my opponent from the rest of my army, so I'm either running a squad of 20 and putting the grimoire on them turn 1, or I'm taking a murderhorde with 8 squads of 5.

If, however, I'm taking grey hunters for my SW, their purpose is to capture objectives. I'm not going to dump a ton of points into them (typically 5 w/ a rhino, or 5 w/ a melta or plasma in a drop pod) because they're expendable.

I'm usually pretty opposed to dumping a ton of points into a shooty unit that can only kill one thing per turn and doesn't have great mobility, so small numbers are typically better. I'd rather have the ability to shoot many times are one thing, or split my fire between units rather than kill something three times over.

When it comes to assault units I tend to think the other way around - I want to a) make sure the unit gets to where it needs to be, and b) I want to maximize my opportunity to multi-assault.

Essentially, I think it makes perfect sense that you run 10 strong squads with a libby or 10 assault marines together while wanting to run 3, 3, and 4 strong ratling squads.

Like the_scotsman said, there's sort of a sliding scale on numbers/wargear vs. effectiveness. If you spend 250 points on a hard hitting but squishy unit, you might as well dump another 50-75 points to make it more survivable (i.e. adding storm shields to Thunder Wolf Cavalry or Draigo/Tigurius to a centurion squad).

There's a reason Eldar Jetbike spam is 6 bare minimum squads of 3, while Centurion Stars and TWC deathstars are jam packed with buffs and wargear - there's a fine line where something is either cheap enough that you take it without caring about survivability, or so expensive that you might as well dump some extra points into it to keep it alive.

 MechaEmperor7000 wrote:
Another reason is if you lack slots. For example each Chaos Obliterator would be optimal when run in units of 1, but each of these eat up a HS slot and CSM don't have a way of otherwise spamming them. This means that every 3 obliterators being fielded this way would require you to shell out another 200 points or so for a bare bones HQ choice and Cultists squads, and Oblits are already expensive as is. Now obviously this comes down to list building, individual armies, formations, etc but it is another reason, and one that GW probably intended originally for large squads.

Also some squads just don't unlock stuff until at larger numbers. most SM and CSM units don't get their max number of weapons unless you go to 5 or 10. Noise Marines feel this one particularly painfully, as they only unlock a Blastmaster every 10 marines or so (I think? don't have the codex with me atm) where they would much rather have it Devastator style (minimum 5 marines with 4 carrying it).

FAQ'ed to 1 BM per squad, 2 at 10.

It's always a hard decision between those extremes: [MSU] <> [Elitist], where MSU is comprised of many small units and Elitist (there's a better name for that, but I forgot) has less units, but each one is powerful.
Marines, using 2x Gladius Strike Force, are generally seem as the epitome as MSU, having zounds of units. The enemy can't kill everyone in 5-7 turns, so the player wins by attrition. Also, the enemy is forced to spend a lot of firepower to kill small units, wasting it.
Daemons using Tetrad formation or just a cad with Daemon Princes/Greater Daemons are called Flying Circus, and is the prime example of an Elitist list. These FMCs are pretty hard to kill and pack quite the punch.

Generally, MSU works better than Elitist, but if your group doesn't field a lot of units, an Elitist list could work. This is a mutable aspect of the game, as your friends start developing counter-strategies to your lists, and so on.

For competitive Tau small units since it allows us to spend more on our big toys.

In more casual games I might up my squad sizes and actually take regular troops;

All good comments guys. Thanks taking it under advisement. Mechemperor, on the slots issue, I hear you, but in the latest edition, if you don't care about any bonuses, you can basically ignore the Force Organization chart, right? (the unbound method, although probably restricted at tournaments?)
I play SM's, Sisters (only sisters too, and their codex is rough right now...not a single skyfire in it) and IG mostly. So a lot of my buffs only go in the five man command squad stuff. I wish I could get a unit of 20 with my apothecary!
I will also point out, on orks, I like the larger horde because they are so cheap. When I talk about my two squads of five repentia...well for orks (or horde armies) that becomes two squads of thirty to guarantee second gets to combat.

The slots thing was a very old holdover from past editions, which sadly still plagues a certain few armies due to lack of formations and updated codexes (I brought up the Oblit example specifically because they are one of the few that if you want to field a Battleforged Army, there's very little way to bring massed units of 1). Other armies don't have this issue mainly due to the formations they got. Like Riptides; if you want more than one Riptide, it's better to just take a Riptide Wing since it's effectively the same thing, but with more buffs.