Most of the people who use those sites either don't want to/can't pay for hosting/domain, don't need a professional-looking site, or find it more convenient. For any serious forum owner, self-hosted is definitely the way to go though.
I guess people that want something easy to handle/ are new to the forum scene. Anyone who wants to get full power over their forums should always get something like MyBB, SMF, if they can't afford vB or IPB.
Well some people are looking for a bit of a cheaper alternative. For a domain name on ForuMotion it's 20 dollars for a year. In addition to that they have almost all of the features VB has. I was a bit reluctant to have a ForuMotion forum because I thought it wouldn't look professional but after looking around at some others hosted by them I decided to host with them.
Money for me mostly.When I started I didn't know how long my forum would last.
But I would never host with a free or remotely hosted forum again. To little freedom and not enough control. For example pro boards (my provider) you can't get a database back up. Heck some hosts will charge you for a database back up. And your often at that host's mercy. At least with normal hosting you can move.
It's good for practice. To see if you really would be able to run a forum and most of all, like running a forum. My first was a free one. I just posted around there with my friends, and it was really fun. Then I started a real one with my friend. If I had not tried a free one first, I don't think I would ever have started one.