Is separating your hosting and domain registar essential?

Well, it's certainly not essential in much the same way as it's not essential that you don't store a gas bottle next to your open fire place.

Whatever happens to your webhost, in the event you don't like their service anymore, you can always move out your domain easily...

I keep them separate,

I have had one issue that, my server host claimed unlimited Bandwidth. When our Bandwidth exceeded the "unlimited" use (some how?) Then our site went down until the host felt we were back in range of use.

Our files were basically held hostage by the host. With Error messages only showing.

Thankfully The Domain was hosted elsewhere and I had Made Backups. So I could point the domain to another server.

After the original site was back online the host told me my unlimited space has been limited due to connections. Bandwidth usage. I purchased a non shared server with another host.

If you have a problem with your host and they won't give you access to your domain name so you can leave. Well... you'll just wish you'd seperated your hosting and domain registar.

It's not necessary per se, but it's a better idea not to put your all your eggs in the same basket.

The typical scenario will involve someone buying a domain name for at least one year, often times many more.
In hosting, subscriptions are usually on a monthly basis. Servers evolve, available RAM increases and so do hard disk space and bandwidth. Some hosts cannot keep up such changes ( I've gone through a few in the past 15 years now for that specific reason ) and within a month you can always look for a better provider.

Another thing about registrars is that it's a very specialist field, and often times if the company is handling both, one of the two aspects will suffer in features and performance.

Some concrete examples of bad registrar service when combined with hosting :

Updated DNS info is not propagated properly (I am currently dealing a case like this ). This means the registrar is probably not compliant with the procedure. In the case I'm working on now, anyone looking at the website with a certain ISP (say AT&T) will see the website, while other ISPs (Comcast for example) will see the old server. This usually happens but never lasts more than 24h. I've been looking for a solution for the past week.

Domain Registration is offered as a service but is in reality sub contracted to an unknown 3rd party.

Inability to transfer domain ownership - usually because no effort was made to implement such a basic feature.

That's a good question all I can say is I like to point my domains to my other web host because its very beneficial having so many domains.

For instance 1&1 only lets you get 2 blogs per package but because I know MYSQL i can make more blogs around that limitation, But I prefer to point my domains to host gator where I have UNLIMITED blogs seems to make more sense.

so in my case it would be essential

That's true to a point. What's more important is how, who and where the domain
name is registered to.

If:

1. You register a domain name as part of your hosting provider's package, and
not with an actual registrar.

2. The host puts it under their name instead of yours.

3. The host eventually goes down under, you both have a dispute, etc.

That's one scenario problems can occur.

If you are using a good host which you can trust there is no need to worry for the domain. But I know few hosts which might give you a hard time if you decide to migrate your hosting & domain from them so yes, you should separate these two things. Caution is better than the cure !

Cheers
Ciel!

It's not absolutely necessary, but in general domain registrars are the best places to register domains and web hosts are the best places to get hosting. If you get both at one place, you'll be getting substandard service in one of the two areas.