OK, here is some of the "why" of facebook for those of us who aren't heavy users.
Facebook is casual and useful.
It's easy to set up an event or fundraiser, invite everyone you know, put up pictures about the event, and so on.
Many comments show that there are expectations for use cases that Facebook really isn't about. "Having hundreds of 'friends' is pointless." "...looking for dates...met someone interesting..." That's not what Facebook is about, nor intended to be.
Yep, you can stay in touch with your close friends on Facebook if you really want. Many people do. But, it's really about those hundreds of people you still care about, but you don't see on a regular basis. It is the best way to keep tabs on them. It's also great for setting plans with them. As a personal side note, Facebook has led to several happy reunions with old friends after I lost their contact information for years.
More about the idea of "Facebook is casual". Facebook messages have injected themselves between email and IM on the formality spectrum, and wall posts are now between Messages and IM. You can initiate conversation with people who would otherwise find it odd. Like, say, members of the attractive sex.
The common theme is that Facebook pleases our in-born psychological social instincts. It is a fine lesson in human factors.
Yet more. The cool kids are on facebook. You know, the ones that we're supposed to hate as self-respecting geeks, because we're smarter but they somehow have more fun? That means people who care about being cool get on Facebook. (Although rebellion is cool, so now it's cool to take a stand against Facebook and stay off. But that's a whole other story.)
It's a perfectly acceptable social norm to "Facebook-stalk" someone: To look up their interests when you're interested in them. That's a big one.
It's a handy, casual way of passing around contact information. Once you know someone's name and a little bit about them, you can find them on Facebook. You don't need to ask for their phone number or IM or email address, find somewhere to write it down, and take 30 awkward seconds to do it. You just say, "Let's find each other on Facebook." To be clear: Facebook makes it just a little bit easier to pick up. Also, friending is a no-cost way of sending goodwill.
So that's why people use Facebook.
People on this discussion board love news about Facebook because Facebook is every tech entrepreneur's wet dream. Zuckerberg is young, modest, smart and very, very rich. Startup founders love to dream about Facebook-like success because that's what they all want. It's intellectual masturbation. When someone posts insights about Facebook's success, instant nerdgasm. Also, Facebook is an important enough influence on mainstream digital life that few Web entrepreneurs can ignore it. Facebook app clones can kill fledgling independent applications fast. And if Facebook manages to get people used to spending money while on Facebook, they could rival Google, Amazon, and Ebay in importance.
Finally, a note about the 'stolen idea'. Let's ignore that where the idea came from is irrelevant to Facebook's current utility and success. You ought to realize that ideas are near-worthless and execution is everything. FB is a case study in excellent execution. They hire brilliant developers just like Joel says, and they built a very clean UI as a competitive advantage over Myspace. Nearly all successful businesses are based on incremental improvements on existing ideas with great execution.
Put it this way: "Online store" is not terribly creative, but pg is rich and famous today because his gang of hackers had the best execution in building one. Search engines were not a new idea when Google took over the world. Nor were operating systems or word processors when Microsoft did before that. Online social networks were not new. They just sucked enough that there was room for Facebook to step in a build a better one.