I assume you're talking about progressive JPEGs. These are still fairly common in my experience. It's just that with today's typical connection speed, you'll rarely notice.

There's also progressive PNGs. Progressive JPEGs have the advantage that they increase compression ratio (though they're more expensive to decode, as you need multiple passes and refresh)

They increase compression ratio? That's counter-intuitive. You're effectively imposing an ordering requiring certain information to be available first, so you'd expect the compression be at most as good as non-progressive. I guess the changed ordering makes the statistics simpler and easier to compress, or something like that.

The downside is memory usage during compression. A non-progressive jpeg can be compressed locally but a progressive encoding requires the whole image. But this is only a small downside.

(Converting JPEG images to progressive format is one of the optimizations mod_pagespeed makes.)

The initial passes are lower freq, so they compress better. More over you have control over them when encoding so you can optimize there (and there are tools that do so), but the defaults used by all encoders are very good across most all images.