to keep your top tube from getting dinged when your handlebars swing around and whack the top tube. doesnt happen on geared bikes cuz of all the cables, i guess.

handlebar tape also solves this problem unless you are rollin' those little trackstar grips that only cover the drops.

my handlebars are covered in grab-ons, so i took off my toptube protector. however I still have one (a bit of bar tape) around the downtube, where the barrel adjuster of my front brake hits on its orbit.

though I think you summed it up best when you said "everyone's doin' it." i personally am working on a little toptube jacket for my bike. chimblysweep knitted a cozy for hers.