If you only need a single server, or maybe two at most, tower units work well. However, if you need multiple servers, rack-mounted servers provide space savings over tower servers. But it makes no sense to install a large, tall rack and only put one server in it. It will be more expensive than a single tower server. Racks make sense when more than two or three servers are needed.
Blade servers, while similar to rack-mounted servers in that they are mounted in racks and also provide space savings over tower servers, also provide additional benefits over rack-mounted servers, such as being hot-swappable and more easily scalable. They might offer more space savings than rack-mounted, I don't know never having worked with blade servers.