As a form of settling conflicts.

If the tournament idea gets going or we decide to have drinking contests, or archery contests, or something like that.

Just another aspect of RPing, taking the certainty of victory away and allowing for some random chance.

In the game this setting is based on some of the most interesting stuff happens when your plans go awry.  

Alain the Old Tournament Fighter hoping for one last jousting victory ends up losing to Cheggog, big shot with the Khuzait Horse Tribes.  He retires to the tavern to drink away his woes only to hear Cheggog is looking for him.  Cheggog admires his horsemanship, his horse, and his dignity in defeat.  He offers him a job riding with them, teaching them what he knows about The Empire.

Or Galvain the Sturgian Viking Badass Mercenary fights on the losing side against an Aserai Lord and is captured.  He treads along with them in captivity through the desert until he sees an opportunity to make a break for it.  He escapes, but soon passes out from dehydration and the heat.  The Aserai Lord recaptures him.  More stuff happens.