From a usability standpoint, title-style capitalization (capitalizing the first letter of each word) increases the conspicuousness of the non-initial words in a caption. This may help users more quickly find key words in a caption to identify and discriminate menu items. For example compare:
Versus:
Ideally, this is unnecessary because your menu captions should begin with their key discriminating words, but sometimes that just doesn’t make acceptable captions.
In the Apple Human Interface Guidelines, title-style is standard for menu items (and commmand/push buttons). Title-style was also standard for MS Windows until
Vista, when the Windows User Experience guidelines switched from recommending title-style to sentence-style (capitalize only the first letter of the initial word) for many situations, including menu captions (http://msdn.microsoft.com/en-us/library/aa511502.aspx). I think this was part of an effort to give applications a conversational webby “inductive” style, where the options are phrased as commands sentences (e.g., “Create a power plan,” “Do this for all current items”).
Personally, I would avoid such wordier UIs for apps, especially for those regularly used by users, and thus by extension stick with title-style. More words adds clutter and more reading slows users down. In fact, users are inclined to skip large blocks of text since reading takes so long, so adding words often functionally reduces clarity.