It should be noted that most items in CS:GO cannot be obtained as a normal drop, only from a crate, so it's not so much that good-looking drops are rare, it's that good-looking items can usually only be obtained by paying money to open a box (AWP Dragon Lore being one of the few exceptions).
1. Items are dropped randomly, or you can buy randomised "crates". By design, plain looking drops are common, while visually impressive drops are rare.
2. When you buy crates and unlock them, there is a "wheel of fortune" style visual system that indicates what item you will receive. There are audio and visual cues indicating how rare or common the item is.
4. There is an in-game trading system that allows users to buy and sell items at an agreed price. Rare items are naturally more expensive on this market. The majority of CS:GO's revenue comes from cuts of these trades.
5. Kids play CS:GO. It is very common to run into young teenagers (13-15) in matchmaking servers.
6. Kids who are exposed to gambling are much more likely to become addicted than adults, are much less likely to have the means to repay debt, and therefore are not held responsible for gambling losses in the eyes of the law. Gambling under the age of 16 is illegal in most countries, and in many cases under 18.