This is an interesting moral question. First off, there are actually laws and regulations regarding the care, treatment, and use of living organisms in experimental research. Usually, scientists try within the best of their ability to perform research on as "low" a life form as possible that would still give meaningful results for their experiments.

What that means is that if they can use bacteria, they will, but if the typical bacterial species (e.g. E. coli) used in experiments don't have the necessary genes, enzymes, etc., necessary for their research, then they will use some more complex organism, such as fruit flies. If the fruit flies don't cut it either, then they'll use even more and more complex organisms, including reptiles, amphibians, and mammals.

Usually, before scientists even start performing their research, they have to carefully plan out which organism would be the most effective to use, while minimizing pain and discomfort (if the organisms can feel pain), and treating the organisms as well as they can.

So why do some organisms need to be used in experiments over others? I think most people would agree that the ultimate goal of biological research is to help people and society, which can be manifested in many levels of detail (everything from understanding small biological systems or mechanisms to developing drugs for those systems which are now understood because of earlier research). In order to understand certain systems or biological mechanisms, especially those that are relevant for human disease, scientists need to study organisms that share as many of the same genes and expressed proteins with humans. Why are genes and proteins that are common to humans and the model organism involved in the study so important? It comes down to the fact that diseases can often be traced back to some protein in some particular type of cell (or even all over the body) not behaving the way it normally does. Proteins, in turn, are produced in the cell by looking at templates in DNA that dictate which proteins should be expressed and where.

It turns out that mice, rats, and other mammals, have incredibly similar DNA to humans. This means that their anatomy and physiology are actually quite similar to humans, and much can be learned by studying these organisms.

It is important that scientists are careful not to be wasteful with these organisms -- after all, I think most people can agree that there is some ineffable thing that gives us some deep-seated, instinctive respect for other life forms. However, without research being performed on model organisms, modern biology and medicine would not be what it is now. Indeed, many of the medicines and treatments that have saved countless lives would probably not exist.

Though it may not seem like it, mice are not too different from us. We share a common ancestor with mice starting around 80 million years ago which is rather recent considering life has been around for billions of years. A lot of scientific research is focused on developing ways to improve human life and thus requires a living organism to study. Mice are an excellent candidate because they reproduce quickly (every 30 days or so) and are similar enough to humans. Although mice are certainly different from humans, the fact that they’re mammals makes them a good approximation. Of all the mammals to study, mice end up being one of the best candidates because they are so easy to work with.

Mice are easy to raise cheaply, and are mammals and thus more similar to humans than insects are, so might tell us more about ourselves than studying insects would.