Population density, when done right, is a great tool to make people happier, give them more opportunities (social, economic, cultural, etc) and reduce their environmental footprint. A big part of it is that you can reduce the amount of pollution caused by transportation and housing, the two biggest resource sinks, with walkable neighborhoods and mass transit, as well as smaller dwellings (but the city becomes your living room and playground, so the actual "living area" can be much larger than for those living in some exurb in a McMansion...).
The Institute for Transportation & Development Policy (ITDP) and our friends at Streetfilms have made this animated short about the benefits of urban density:
Urban density is something that we've covered quite a bit here at TreeHugger. A good place to start is with Lloyd's Is There a "Goldilocks Density"- Not Too High, Not Too Low, But Just Right?
If you want to dig deeper, ITDP has reports that you can peruse here.