Although I find the older lugged frames prettier, there were a number of reasons that lugs dissapeared.
Lugless, TIG welded frames first became popular on mountain bikes. The TIG weld is as strong or stronger than a lugged unit although both types of construction are plenty strong.

One big reason that lugs dissapeared is that a set of lugs will only accomodate a few frame sizes due to the different frame angles needed to make extra small or extra large frameserts. Hence, the expense to tool numerous sets of lugs would result in a frame that would be more costly.

Also, lugless construction means that the frames can be robotically welded which is much cheaper and less complicated than brazing tubes inside of lugs.

Lastly, without lugs you have a lot more freedom insofar as the diameter and shape of the tube. With lugs, you're forced to use steel and small diameter steel tubes. Without lugs, you can vary the shape and diameter greatly using various materials (aluminum, titanium & steel).

The next frontier is the new generation of carbon frames. For a great example of sexy tube shapes using carbon, take a look at the De Rosa Tango:


http://www.velonews.com/tech/report/...es/6888.0.html