In one of my lectures the professor said that there are two main ideas for the true purpose of Medieval British castles: the first was that they were defensive and could hold seiges and kept the royalty in them and people lived there, the other was that it was just a show of power and intimidation for the enemy, and only to be used as a last resort for defence. He was in the second camp, and I can see why both arguments are valid, but I couldn't find a lot of research to back him up. Here in Wales we have more castles than anywhere else, and I can see why castles would be built for defensive purposes (e.g. Pembroke Castle) and why it would be built for show (e.g. Chepstow Castle). So which is it?
I think the second camp you refer to was argued by Charles Coulson, so if you wanted more information on it I would suggest reading his books on castles. http://books.google.co.uk/books?id=J5bKbjMt15wC&lpg=PP1&pg=PP1#v=onepage&q&f=false
As opposed to the question, which was it? Well that depends on your own opinion and which argument you think is more persuasive, or it could lie somewhere in the middle :)