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It is also needed for the Supplier achievement.
pcxbox360 Sometimes, when the dragon is killed it will appear to not be lootable. This is because the 'loot' can spawn in a different place on the battlefield - look around in targeting mode (pc - [TAB], xbox360 - [LT])
Dragon's blood has wide variety of uses, both magical and culinary. It's an important component of rune-crafting and those like my great-grandfather enjoy a sprinkling of the powdered stuff to their food at the dinner table.—From Discovering Dragon's Blood: Potions, Tinctures, and Spicy Sauces, by Ferdinand Pentaghast
—From Codex entry: Dragon's Blood