Like some others here, it's more for the challenge/incentive to improve skills, and the element of danger and surprise (even bad surprise) than simple sadism. It does also add to the story telling element greatly, and part of the fun of the sims for me is a bit of drama. I never liked locking sims in a room and starving them, or taking away the pool ladder. Even though I know they're just pixels, I still don't like to see them suffer, unless it's part of the story and they want to escape or be rescued. However, I confess I do laugh when a low level sim attempts something they shouldn't be (like repairing a tv with low mechanic skill) and meets an untimely end. I recently had a sim and her best friend become vampires. The friend sim came over to my played sim's house all excited to tell her (in my story), but since I had such a long walkway to the front door, she caught on fire in the sun on they way and died at the door. I laughed precisely because I didn't want or expect it. I was like AW MAN, darn vampire noob.
Yes, there have been times where I've had a sim kill other sims (via mod) because they were annoying or as part of the story. I had a Dexter type serial killer in the Sims 3, and it turned into one of my favorite story lines ever. So, I'm not sure if this answers why, but I can tell you it doesn't come in my case from a place of cruelty, but of needing a little true risk, excitement, and additional storytelling in game. In the same way I like to see a thriller movie instead of a movie watching someone cook and smile for 2 hours.