Hehe, I have not said that it all must be connected with erotics. Perhaps I put it wrong, when saying that about erotics in first sentence. It is only one of possible aspects for deepening psyche. I actually specially mentioned that because of poll's option - romance. And romance without little erotics in it is too dreamy and unrealistic for me, but opinions on that can vary of course. Self-analysis is great to familiarize chars with player, that way story will be more intriguing, and player will become attached, wanting to know more about what happens to this party, because if you are good in story writing, player will probably emotionally attach to them. Like in dnd, it is always more interesting and fun to play with players that made good job on their char's psyche, and if they really play like it.
Term eroticism for me is in the first place art. To make someone sexually aroused (with your clothes on, other than that it is mostly pornography) you can use special motions, words (mostly ambiguous) and such to invoke in someone desire, emotions, passion... It gives real power to romance. Because romance for itself is too dreamy, and some people will find aversion for it. Personally I like it, and most of my poetry is romantic. But never forget the power of sexuality for humans. Sex is the mankind's best way of pleasure. I understand that most of this forum consists of people younger than 16/17, so you probably won't be much impressed and/or introduced with artistic side of sexuality.