Because it's the best email system available for most people. If you value productivity and usability the most, Gmail is the way to go. It's that simple.
Gmail is the only email system that I can tolerate. It actually makes using email borderline fun, whereas even something like Exchange is a nightmare. It works great with various applications, smartphones and has by far the best Web interface around. It handles spam well and allows me to easy filter messages (and have those filters work across devices).
For most of us, email is a tool that helps us get work done and communicate with family and friends. Rolling our own solutions is not worth the extra time, headaches and lost usability.
Google doesn't care about our data individually. They make money in anonymized, aggregate data. That's why I don't care that they are making money off of my data, because it's not my data that they care about. It's our data that they really care about.
And while I'd prefer if my email didn't fall into the hands of the US government, I don't actually have anything that I care that they see in it. It's more principle than anything else. And, as a US citizen, if I rolled my own solution, I don't think it would be any safer in my hands than Google's when it comes to warrants.
I do have real fears. My real fears with email are in using a system that isn't usable, isn't reliable and has data integrity issues. At the end of the day, Google's servers and technical know-how surpasses mine, and I feel that my email is safer and less likely to be lost due to hardware failure in their hands than in mine.
It really depends on what you value. If my email information was really sensitive, I would probably care more. If I were a company that valued sensitivity a lot, I might not use Gmail. Certainly if the work you do or the industry you are in needs the utmost privacy, you should look into the most secure option as possible.
But as an individual, Gmail is as good as it gets for me.