Although some plant parasitic nematode species can cause severe damage to crops, in fact only a minority shows a parasitic lifestyle. Most nematodes are beneficial to mankind by stimulating nutrient (carbon and nitrogen) cycling or controlling insect pests. Some species are used as model organisms to address fundamental biological questions such as aging and tissue differentiation.
One group of nematodes is so useful that they are cultured and sold as a commercial bio-control agents: the entomopathogenic nematodes. This group includes two nematode genera whose members are able to infect insects (Steinernema and Heterorhabditis). This may not sound very appealing, but is a very effective way of controlling insect pests without using pesticides.
The nematode itself does not kill the insect; they do not have special structures to attack and kill insect larvae. Instead they use biological warfare: once they have entered the insect via natural openings, bacteria are released that produce toxins which eventually kill the insect. These entomopathogenic nematodes have a special structure for storing the bacteria that will kill the insect host. Once all of the resources within the host’s body are consumed, the infective (= loaded with bacteria) juveniles escape and enter the soil where they will search for a new host.
(Source: European Atlas of Soil Biodiversity|Section2: Organisms of the Soil)