Like my colleagues have said, it depends if you're speaking to me... there are ways I can identify you from your primary radar return alone so squawk is convenient but not essential.
If, on the otherhand you don't speak to me... it makes a big difference whether you're squawking and have Mode C. Compressing the rules slightly. In the Class G in the UK... if you are squawking 7000 with Mode C I can take another aircraft to 3000ft above/below you (providing that below 10,000ft I get a gap between the two aircraft's primary radar returns)... but a non squawker (or one without Mode C) has to be assumed to be at the same level and I have to steer my RAS traffic clear of you by 5nms horizontally (PITA)
With the forthcoming advent of Mode C this problem will all but disappear when most aircraft will be mandated to carry an SSR transponder... although I believe the consequences of micro-lights etc not carrying them is causing much debate (?). I was therefore, interested to hear of a transponder that was light enough for a microlight to be able to carry, presumably without significant penalty.