BECAUSE IT LOOKS COOL.
Remember that Nor class space stations were not just used for cargo and docking, but they also did ship resupply and, in Terok Nor's case, was responsible for mining operations.
The "Docking Ring" contained:
- Docks for ships
- Cargo Bays for transshipment, and also long term storage for fleet resupply.
- Mining processing equipment
My initial joke, however, was not totally a joke. During the run of Deep Space Nine, a constant theme was the Cardassian style of over-engineered, over-wrought heavy slabs of metal. They like huge spans of space, arches, and rings, based on the rest of the design details once can see around the station and on the computer screens. The only design constraints in space are the structural integrity of the machine you are building, so you can build big and (in the Cardassian's case) cheap.
Nor class space stations seem to be a very standardized design (Cardassians seem to like standardized designs as well), so the Docking Ring would be "flex space" for whatever the Cardassians had need of wherever they placed their space station.
Note that as originally intended, it appears that the pylons were expected to be the standard docking ports for personnel, while the ring docks were intended for cargo. However, while we DO see ships docked on the pylons (I'm specifically thinking of NCC-1701-D during the pilot), the design of Cardassian ships (narrow and long) wouldn't really fit the pylons every well. Ralph Crown's comment on the question, that it exists to space out the docked ships, makes sense as well.
One more note on "spacing out the ships," the way the docking ring is designed makes a lot of sense, as the cargo is stored near the docking ports, and the cargo bays are spread out so there's always a docking port nearby. This would let you optimize cargo operations by spacing out and segregating cargo, and placing it near the specific port you need to use, instead of using a centralized cargo bay that then needs to have stuff moved around. Remember that Terok Nor was a TRANSSHIPMENT depot; it was only a temporary storage location for holding and processing ore brought up by transporter or ore freighter with the intent it be turned around to Cardassia as quickly as possible. SO keeping the cargo near the ships makes excellent logistical sense.
As stated in @ench's comment below, this space would also be useful for garrisoning soldiers and materiel up in space where, in theory, the Bajoran resistance would not be able to access or blow up. According to the episode with Empok Nor, we also know that Cardassians can hold soldiers in stasis like cargo.
Source is Memory Alpha's meagre pages on DS9 and Nor class space stations and observations from the show.