Having a co-applicant does 3 things for you :
1. It increases the loan amount you can take.
2. It at times reduces the interest rate applicable (if the co-applicant is a woman, when the main applicant is a man).
3. Offer tax benefits under section 24 to both the applicant and co-applicant thereby reducing the overall tax paid.
Someone else too had a similar question on this forum - you can refer the answer to that too :
https://www.zippserv.com/forum/bangalore/home-loan/309/can-me-and-my-wife-both-can-take-part-on-the-payment-of-my-emi
Apparently, the maximum number of co-applicants allowed is 6 ; frankly even some bank guys I asked were not sure of this number, but it seems to be mentioned in some forum. Please note that a co-applicant has to be a relative or your spouse.