starchk20, the reason, most likely, was because the controller may have thought they were going to lose the required minimum seperation between your a/c and another a/c. or maybe she really needed that level report from you to descend someone on top of you to fl280. as stated in earlier posts, it could have been a number of things.
also, keep in mind that the info a controller sees on the radar scope is not instantaneous. there's about a six second lag between what your a/c is doing and what atc sees on the radar scope. in those few seconds, A LOT can happen. thus, sometimes it's important for the controller to know exactly what your altitude is at that moment instead of waiting for the radar scope to update your mode c info.
many times, atc will 'ask' a pilot to report leaving/reaching or confirm level at x altitiude. it's a 'hint', a big 'hint' if the controller keeps requesting the altitude info from you, that the controller wants to hear what they need to hear to keep the expeditious flow of traffic going. hope that makes sense???
also, the example given above by 100.5 is a poor one. a controller only needs 1000ft seperation. since the one a/c received a clearance to fl270 AND read it back AND the controller heard the readback, there's no need to ask for a level report and the controller can subsequently give the delta a climb to fl260. fl270 - fl260...1000 feet seperation. it may be a good idea for the controller to issue traffic to both aircraft if their targets are going to eventually merge at some point.
and no, pilots are not required to report 'leveling' at their last atc assigned altitude. if that were the case, there would be A LOT, and i mean A LOT, of unwanted frequency congestion. i don't know any pilots that do that, unless requested to do so by atc.