> I can't see why a tech savvy person wouldn't just have a domain and email hosting service instead of gmail

Maintaining your own email server to the same level of reliability (backups, etc), speed, and functionality as gmail would be a lot of work. Not every "tech savvy" person out there wants to invest the time and resources needed to duplicate what gmail gives them for free.

[Also gmail's web interface is very, very, good, and it's well-integrated with other google products, which are very popular.]