IS MONITORING SERVICE REALLY NECESSARY

An alarm system without central monitoring service relies on neighbors or passers-by to hear the siren and take action - whether they come over to check or just call the police, you're expecting a volunteer to take responsibility. Maybe it's different in your neighborhood, but here in the New York metro area, people either don't care or don't want to get involved. Even if your neighbors do help, they'll either put themselves into potential danger by investigating, else they'll only be able to tell the authorities that your alarm is sounding - not what type of alarm, or which door, window, or smoke detector was tripped.

Another consideration is that dealers will typically offer discounted installation charges if you sign a monitoring agreement. Just like cellular phone companies will practically give away their phones just to get you to sign up for their service, many alarm companies will install an alarm system at a severely discounted rate (possibly even for free), if you are willing to contract with them for monitoring.
(Maverick Security, for instance, offers a $615 discount, which basically translates into a free system for many apartments and small businesses.)