The hip joint (greater trochanter) is the most critical area to protect—it's the bony prominence on the side of your upper thigh and the most common fracture site in falls. But side hip protection covers the iliac crest, which is the upper rim of your hip bone that sits above your waist. If you fall at an angle or land on your side, this bone can take a hard hit too.
Side hip coverage is especially important for older skiers or anyone with osteoporosis, since the iliac crest is vulnerable to fractures and bruises. It's also worth considering if you tend to fall on your side rather than straight back or onto your rear.
The tradeoff is that extending protection up to the iliac crest adds a bit of bulk around your waist, which can feel slightly restrictive under fitted ski pants. However, most modern viscoelastic pads are low-profile and flexible, so the comfort sacrifice is usually minimal for the added protection.