Maybe because many devs use Macs / Windows? Maybe WSL may tilt the balance in LXDs favour, but on OSX? Run it a VM yourself without the conveniences of docker-compose up?
As a Linuxuser myself, i looked at the competing solutions (podman, LXD, and the one by Canonical whose name i forgot) and thought: "Ain't gonna fly in a mixed environment."
They may be technologically superior, worse is better once again i guess. Would prefer them to Docker too.
I work with a few people who believed it was native, and used it for quite a while, until things started going wrong and we logged in to the vm to fix them.
And docker marketing has very effectively used that to their advantage.
On Linux you are going to run docker in VM anyway if you care a bit about security, but I know that almost all devs run docker directly on their laptops and with the user's full access to docker - ie. their user effectively becomes user. Without second thought ...
https://news.ycombinator.com/item?id=24782999 tongue in cheeck indeed, but better marketing it is, of course
Criminally underused indeed. I have no idea why it's not more popular for 'average' users/orgs. I don't know what issues may come up with scaling this up, but in our small org we've been running 20-30 (mostly unprivileged) LXD containers in production for several years now for all sorts of intranet and external-facing services (auth, DB, web, etc). Sure, it requires a bit more thought to set up than Docker, but it's well-documented (for most people's uses at least), secure, stable and lightweight.