I've been interested in the caps issue for a while. I'm a native Hebrew speaker, and Hebrew doesn't have the idea of Capital letters - there is only one set.
I wonder why caps were even important. I mean, it's just another set of the same letters, what's it for?
After a while, I did find some uses for it. Namely, when reading books, if you come across a name you don't recognize (say, the name of a person), in Hebrew you can't tell that it's a name; for all you know, it's a word that you don't recognize and not a name.
I think the existence of capitals has more to do with history and less with utility. As you said, it’s not obvious why you would need capitals.
The Romans started with nothing but what we today know as capitals [1] (imported from elsewhere but that is another story). Everyone who needs to write a lot and fast (e.g. merchants) will optimize the letters for this purpose and thus dramatically change how the letters look. That’s how the Romans got their cursive [2]. If, on the other hand, your task is to chisel letters into stone or copy a book you can be extra diligent, an opportunity to clean up letterforms [3].
Those two writing styles – cursive and capitals – were not intended to be combined with each other. It’s only later, in medieval times, that both letterforms are used together [4].
It dates to the medieval copyists---mostly monks---who developed new ways of writing that were faster. In some cases the letters connected (what we'd call cursive), sometimes just flowed (italic), sometimes they were just shorter and rounder (uncial/half-uncial). The dominant form was this new style. BUT, for the beginnings of chapters and/or pages, they would revert to the old Latin letters, often with a great deal of decoration. Thus the capitals remained in active use even as the running text evolved. The printing press narrowed the number of distinct styles somewhat, but even today if you look at handwriting across Europe, the capitals are pretty recognisable and would look familiar to an ancient Roman, but the rest of the text diverges a lot.
...which doesn't exactly answer your question of what it's "for", I guess. But to some extent, we have two cases because that's what history gave us, and now we make use of them as best we can.
In this context, the German use of caps is interesting. They capitalize every noun, and I believe that such a use has been proven to allow for speedier reading than the capital use in other Western languages (i.e. English).
It was common until the 19th century to capitalize all nouns in English as well.
I've found in reading older text that it doesn't noticeably affect the speed of comprehension, but the capitalization of nouns does seem to subtly shift the emphasis away from the action being described by the sentence and toward the things taking part in it.
Hindi doesn't have capital letters either. I think we recognize a name more by it's context than the case of the first letter. If I found a hindi word I didn't recognize, I would still be able to tell if it were a name or not. Perhaps caps exist for purely stylistic reasons.
I wonder what would happen if someone did a design study of showing all caps vs sentence case text to people who have never seen English. Wonder which one would they say looks better.
I wonder why caps were even important. I mean, it's just another set of the same letters, what's it for?
After a while, I did find some uses for it. Namely, when reading books, if you come across a name you don't recognize (say, the name of a person), in Hebrew you can't tell that it's a name; for all you know, it's a word that you don't recognize and not a name.