More than a jujutsu technique for dealing with such incisive questions, it is clear that being the second contender to enter the marker saves you the trouble of having to create such market (and it is sometimes reasonable to play it this safe). It's just a different approach to making money. To me, a VC asking this is a sign of weakness on his behalf (due to ignorance?).
2. Yes, I agree on a VC's concern of risks on the viability of a market. (See First Mover Advantage myth) I'm focusing more on the way it's communicated rather than the content or the why.
3. Yes, I think you're right that a VC is masking weakness if he asks this, as opposed to, "How are you different from X?" Though, IMO it's still an assertion of dominance, similar to a veil of bravado.
The key insight though, is that dominant individuals tend to respond to assertions of dominance with their own return assertion of dominance. In other words, they don't like being dominated, and it's this reaction VCs are typically looking for as dominant behavior is likely perceived as a requisite character trait for entrepreneurial success. Programmers though tend to conversely be a prestige driven culture and respond negatively to dominance challenges like this.
If you're curious to know more, checkout the very interesting paper "Two Ways to the Top: Evidence That Dominance and Prestige Are Distinct Yet Viable Avenues to Social Rank and Influence"[1]
[1] http://www2.psych.ubc.ca/~henrich/pdfs/Cheng%20et%20al.%20(2...