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Watching flying videos and listening to LiveATC, you will sometimes hear a pilot cancel IFR approach.
Why does the ATC care if you are on IFR or VFR? So long as you get on the ground safely, it seems like it wouldn't matter if you were looking at instruments or out the window.
Surely the "radar service" is still running for other aircraft, so it seems it's merely a formality to indicate how a craft was navigating in the event there's an accident. Is there another reason I'm not thinking about?
It's all about making sure everybody knows what's going on. While you are on an instrument approach and thus flying IFR, ATC is responsible for spacing you, giving instructions on heading and speed in order to fit you in with other inbound aircraft. In that situation they expect you to confirm and follow those instructions, and if you don't it makes for a lot of headaches.
If you're on a visual approach, such as when you've cancelled your IFR flight plan after descending below sparse clouds with the runway now in plain sight, then the tower knows not to give you spacing instructions; they instead space IFR traffic around you, while other VFR traffic just has to maintain their separation minima from you. Knowing that you're on a visual approach means ATC won't waste their breath trying to get you to adjust your airspeed, altitude or course to follow a traffic pattern; they'll just give those instructions to other aircraft in the pattern to maintain a steady traffic flow.
... unless you're in Class B space. If you are flying into a Bravo airport, you can still request a visual approach, but approach control has to OK that change (especially for airliners), and ATC is still required to provide separation services to you whether you're VFR or IFR, so they can still give you instructions regarding your airspeed to make sure you fit into the IFR traffic pattern. This may, at times, require an uncomfortably fast landing for GA pilots being spaced in between commercial airliners at a busy time. Some Class Bs like Phoenix or DFW will have a runway more or less reserved for smaller aircraft so there's less disturbance to commercial airliners with higher approach speeds, but not all airports have that luxury; if you want to land your small single at O'Hare or Dulles, you'll probably find yourself spaced in-between airliners and forced to very precisely time your approach so you can touch down and clear the runway in time for the plane behind you to take off. If traffic is heavy, you may not get in if you greet them with "Hello O'Hare Approach, Piper 354 Alpha...". As soon as the O'Hare controllers hear your GA small-prop callsign, if the pattern's too busy they'll deny you Bravo entry and recommend you head for a smaller airport like Chicago Exec or Gary.
There's really no "must" for in-flight cancellation - If you want to you can continue under IFR all the way to the ground, even if you've broken out and are in VMC, and then close your IFR flight plan once you're on the ground (by radio if still in contact with ATC, or by telephone).
(You must however cancel your IFR flight plan at some point or ATC will assume you have made a smoking hole in the vicinity of the runway and send people looking for you.)
Pilots may cancel IFR in-flight if they've broken out of the clouds and are operating in VMC (with all appropriate visibility and cloud clearance requirements met, and the weather such that the pilot can continue to meet them until they land).
The big advantage of cancelling in-flight is that it helps out ATC.
When operating IFR at a non-towered field operations are handled on a one-plane-at-a-time basis: If you are on approach under IFR ATC can't take another IFR aircraft - inbound our outbound - until the last one they authorized departs the area or calls in to cancel IFR. If that aircraft cancels "early" (in flight, because they found VMC under the clouds) they can bring another IFR aircraft onto the approach, which avoids having to stack them up in holds or other traffic management tricks.
I've never heard of a requirement to cancel IFR per se. That's left to the PIC's discretion. I do know that if you are flying an instrument approach into an untowered airport, controlled airspace around the airport ends at 700' AGL i.e. the transition between Class E Airspace and Class G Airspace at which point ARTCC can no longer provide control and radar services in this airspace. The flight plan does continue to operate under instrument flight rules as required, particularly if you have to go missed as you will immediately switch from the CTAF back to center or approach and declare missed. This is not a problem with a towered airport as you will be immediately handed over from ARTCC or approach control to the tower for the rest of the approach and landing. As mentioned above this can help alleviate workload for approach controllers as well.
Sometimes pilots will cancel an IFR flight plan when arriving at an airport if the local weather accommodates VFR flying for reasons of expediency; you can quickly enter the VFR traffic pattern and land as opposed to being vectored out to an initial approach fix for flying an instrument approach.
IFR flight requires separation minima to be applied by ATC. When an aircraft reverts to VFR (cancels IFR), the pilot takes on the responsibility for separation from other traffic. By cancelling IFR, you relieve ATC of the restrictions incumbent with instrument traffic requirements.
