Because it was tactile, and allowed for you to spin at higher and lower speeds. Good luck pressing a button with any velocity at all, and I've never seen the "press and hold for higher speeds" thing done half as well. Not to mention that it completely lacks in terms of feedback.

The smartest thing they did with the click wheel after the wheel itself was the little clicking noise they played as you spun it. It made it feel mechanical, and gave you immediate feedback about how fast you were going.