I would have thought that the OS can hold the file im memory instead of writing it to the HDD
It does. That's what the cache manager is for (see MSDN).
What (I think) retro83 was saying is that if you turn off your page file completely then that means all your allocated memory must be real, physical memory, even if it was allocated by some background process that just hangs around and never uses it.
Which means there is less real, physical memory left to use for file caching, so in theory, turning off your page file could make switching between applications faster (since they are always in physical memory), but it may also slow down disk operations (since there is less memory available for the cache manager to use to cache files).
Personally I'm not sure either way.
Looking at Resource Monitor on my Vista box I can see that I'm currently seeing around seven hard page faults per minute (i.e. seven hits to the pagefile on disk every minute).
So getting rid of my pagefile would eliminate those seven hits (which won't really take up any measurable time), but would cost me physical memory that could be used for file caching.