I think that the old joke about Emacs being an OS is actually very insightful. Living in Emacs is basically replacing most of your interactions with the OS (and in particular its window manager). Some, like me, find that Emacs as a pseudo-OS has a better approach towards productivity than your regular ones. It's opinionated - it encourages all "apps" (elisp scripts, basically) to conform the same text-oriented, fully customizable interaction patterns. And all powerful text-operating facilities of Emacs - navigation, searches, keyboard macros, etc. - can be used to interact with every "application". All the different modes and scripts in Emacs feel like a part of coherent whole, not separate apps. It reduces mental context switching tremendously.

You can get halfway there with a decent WM (xmonad, StumpWM and the like), but you still don't get the other half - unified and very powerful interaction, ability to tweak and instrument - and even combine together - applications, and documentation available at your fingertips. Living in Emacs makes me feel the computer is a powerful tool, not a toy.