1. Blogs are all about content. Search engines love content. They don't love Flash, and they're still struggling with photos and video, but they absolutely get content.
2. Blogs have text-based navigation. Search engines have an easier time with text based (vs. image based) navigation because it's more transparent. Search engines for a while now have told us that they want sites to serve up the same information/experience to a search engine bot as to a person.
3. Blogs offer lots of links. If search engines feast on words, they travel on links. Blogs are often a good place to find new content on the Web.
4. People are more likely to link to business blogs than business Web sites. At least, this has been my experience, and anecdotally what I've seen out there. I believe this is because of the interactive nature of blogs, and they're traditionally more about communication than selling. And since getting incoming links is half the battle of search engine optimization, this is a key point.
5. Blogs make it easier to create more pages. Search engines don't rank Web sites, they rank Web pages. In other words, every Web page is an opportunity to rank well at the search engines. Every time you put up a new post, you have another opportunity to be found at Google, Yahoo, or any other search engine. You don't need to worry about how this is going to fit in your current Web site navigation, you can just assign it to one or more categories and be done with it.
6. Blogs put you in control. This doesn't directly affect your search engine optimization, but with a blog you can publish when you feel like it. You don't have to worry about how much your Web developer's going to charge you for an update, or when he's going to get to it. That makes it easier for you to target new keywords and go after the long tail of search that can bring ready-to-buy, qualified leads to your site.
If you are interested in better rankings but don't yet have a blog, the good news is there's a great opportunity for you to increase your search engine visibility.