Well, let's take a step back and think about the sync problem and what the ideal solution for it would do:

• There would be a folder.
• You'd put your stuff in it.
• It would sync.

They built that.

Why didn't anyone else build that? I have no idea.

"But," you may ask, "so much more you could do! What about task management, calendaring, customized dashboards, virtual white boarding. More than just folders and files!"

No, shut up. People don't use that crap. They just want a folder. A folder that syncs.

"But," you may say, "this is valuable data... certainly users will feel more comfortable tying their data to Windows Live, Apple's MobileMe, or a name they already know."

No, shut up. Not a single person on Earth wakes up in the morning worried about deriving more value from their Windows Live login. People already trust folders. And Dropbox looks just like a folder. One that syncs.

"But," you may say, "folders are so 1995. Why not leverage the full power of the web? With HTML5 you can drag and drop files, you can build intergalactic dashboards of statistics showing how much storage you are using, you can publish your files as RSS feeds and tweets, and you can add your company logo!"

No, shut up. Most of the world doesn't sit in front of their browser all day. If they do, it is Internet Explorer 6 at work that they are not allowed to upgrade. Browsers suck for these kinds of things. Their stuff is already in folders. They just want a folder. That syncs.

That is what it does.

Apple, like Microsoft has synced folders. Back in 2000 I had a free Apple iDisk, a WebDAV folder. You could access it on Windows, Mac and any other OS with WebDAV support. It mounted a drive right on your Desktop, easy as pie, drag 'n drop.

Later, Apple charged for the service and upped the storage capacity. Now it's part of MobileMe. Now I'm a paying MobileMe member, but prefer Dropbox.

You'd think the $100/year MobileMe iDisk would perform better, it doesn't. You'd think after 10+ years, Apple would've refined iDisk, but no. It's still a basic WebDAV disk.

Dropbox hires expert Mac OS X and Windows developers who do nothing but make it work well. It never hogs bandwidth like iDisk. It never hogs CPU cyles like iDisk. It never inconveniences you when it's working. It's sensitive to the user.

There are plenty of other reasons to love Dropbox, but performance is something they really work hard on. It's as important as any other Usability concern. No syncing folder is as unintrusive.

P.S. The Dropbox iPhone app generates short URLs for publicly shared files. It's the little things.

There are several reasons for Dropbox's popularity. The team behind Dropbox has compiled their lessons to learn of their success in these slideshows:

http://www.slideshare.net/gueste94e4c/dropbox-startup-lessons-learned-3836587
http://www.slideshare.net/adamsmith1/from-zero-to-a-million-users-dropbox-and-xobni-lessons-learned

I have seen the potential of Dropbox very early.

1. Name (Branding) - They chose a very good name. (See: Quora User's answer to What are good company and startup names?) Firstly their name describes their product & use case and secondly their name can be spelled easily. You can tell your mom or dad over the phone that she should check out DropBox. Their is nothing you can misspell here. Drop-Box. Easy as that. Don't laugh about it. There are smart founders running around in Silicon Valley who would have named it 'DrpBocs' (*facepalm*). I think their name is 30-40 percent the reason for their success. They could have done everything else right, but by choosing a bad name like DrpBocs they would not be as successful as they are.
2. Idea = Pain killer - The product is offering clear value. They are offering something that people want. Point. And their is nothing you can not understand about their concept. It is possible to explain the idea and benefit for the user in the length of a tweet.
3. Execution - The team behind Dropbox not only thought about a clever idea and name, they also tested and improved their product and usability constantly. And they were executing perfectly from the beginning. I must say that their closed alpha version felt more like a open beta version. Everything just worked smooth and fine ever since.
4. Usability - Their design and ux was very good from the start. They improved it and perhaps they used Optimizely http://vimeo.com/15321875
5. Marketing - They had and have a landing page that explains their product in a few clear words. They did not start with the sadly very common 'we-dont-need-to-explain-what-we-do-because-we-are-so-cool approach, nor the we-are-so-proud-of-every-detail-we-would-like-you-to-know (the too much information) approach. They just again did it right from start. Viral Marketing: They use a word-of-mouth marketing strategy. By inviting other people to become Dropbox users the people who sends the invite gets more free space. This led to massive buzz in the early stage.
6. Top-tier VC investors - Dropbox got seed funding by Sequoia Capital and Series A by Accel Partners. What more can you ask for than having the best minds improving your service and helping you with their connections to the media, press etc.

P.S.
There have been competitors with similar approaches. But none of them executed and marketed as good as Dropbox. I used for some time two services: Dropbox and Omnidrive.

Omnidrive http://en.wikipedia.org/wiki/Omnidrive were from Australia and were founded long before Dropbox in 2004. They launched at the Web 2.0 Conference in 2006. They are in the deadpool since September 2008...
The Dropbox service was founded in 2007, had a alpha version in between 2007-2008 and launched at the TechCrunch50 Conference in 2008. Therefore I would not call Dropbox the revolutionary first-mover in this space. Dropbox just executed every aspect that had to be executed from the start better than Omnidrive.

Here are the Techcrunch stories related to Omnidrive. Quora User and Michael Arrington were convinced and notable investors.
http://techcrunch.com/tag/omnidrive/

Dropbox is totally painless. That's the best part, in my opinion. It works on my window machine, my linux machine, and my iPhone, and I share folders with friends on macs too, where it also works smoothly. Windows Live Sync only does Windows and Mac, and those not as well. Also, one of the major things I use it for -- sharing folders with people -- works soooo much better when I can just ask them to sign up on this clean little site and install a painless little tool and not ask them to create a Windows Live ID with all its associated rigamarole. I've found it best not to underestimate how much some people have a revulsion for Microsoft.

I'm going to echo a lot of what has been said already but emphasize something that, I think, has not; marketing. Obviously, Dropbox is simple. But the company took that concept and drove it through everything they do.

Software - It may seem simple to make things work fast, but that's not always the case. Sometimes making things work quickly means being willing to leave out things you like. I'm willing to bet (I have no knowledge of this) that the developers had/have lots of cools stuff they'd like to see worked in to Dropbox but it doesn't get added until it works simple and fast.

Marketing - That word doesn't fit what I'm talking about but it will have to do. From their clever and charming 'why to' and 'how to' videos to their giveaway 2GB of file space, they get people using their service, or at least talking about it. I haven't broken through my 2GB yet but if the time comes I won't look anywhere else and that's because my 2GB and the service have been flawless.

Interface - As many have said, Dropbox had the right idea when they tied things to a folder. I think most 'users' are wary of 'the cloud' not because of privacy, or security, but because they still don't understand the concept. So Dropbox just took their role, the cloud, out of the discussion and made it seem like magic. People like magic.

Boiling this down, I think their success has a lot more to do with their ability to do the simple things very well than that their product is any better, technologically speaking, than anyone else's.

Besides all the technical/simplicity reasons mentioned above (i.e., "it just works"), it's worth noting that for most consumers brand actually makes a big difference.

"Dropbox" is a very simple brand, and simplicity is very attractive when it comes to a complex problem like folder syncing.

Whereas Microsoft offers "Windows Live Sync," "Windows Live Drive," "Windows Live Foldershare" (now defunct/shut down), and "Windows Live Mesh." There are three different brands, and I'm sure the sum of the Microsoft technologies have way more features than Dropbox. But most consumers (and even most geeks) won't even try the Microsoft solution in the first place because the brand is scary.

Microsoft used to run a service called "FolderShare" (which they acquired), and was a much simpler brand for the same purpose. I suspect these same technologies but built under the simple "FolderShare" brand would have performed better.

However, "FolderShare" was renamed to "Windows Live FolderShare" shortly before it was shut down completely, all of which really damaged the users' future trust in any "Windows Live"-branded folder solution.

Note: Microsoft will probably say that Windows Live Drive has many more users than Dropbox. (This is probably true, since attaching images to Hotmail messages automatically creates a Windows Live Drive account.)

It works. That sounds like a cop-out, but it's a big part of the success. It works and with very little overhead. It works the same on Mac, Windows, Linux, can be easily integrated into mobile and desktop apps (which makes the process painless and invisible for the user) and it's fast.

Having something work reliably and seamlessly is a big deal. If I copy or create a folder in Dropbox, I know that it will soon be available on my other systems or if absolutely needed, on the web. I don't have to use a web-based uploader, I don't have to mess with any sharing settings and I don't have to change anything other than making sure the file is in the Dropbox folder.

As Michael Wolfe said, it doesn't add on extra features that people don't want. Sure, you can extend Dropbox's usefulness with some really geeky add-ons, but the base product just does what it does. Most importantly, it does it well.

Dropbox's widespread appeal stems from its user-friendly interface, enabling effortless file storage, access, and sharing for both individuals and businesses. Its cross-platform compatibility ensures accessibility across diverse devices and operating systems, while robust collaboration tools like file sharing, commenting, and simultaneous editing cater to team needs effectively.

Integrating seamlessly with numerous third-party apps expands its functionality, and its stringent security measures, including encryption, prioritize safeguarding sensitive data. Moreover, Dropbox's real-time file synchronization across devices significantly bolsters productivity, collectively solidifying its position as a premier choice for file storage and collaborative work environments.

I understand that users of file hosting services are scattered between Dropbox vs OneDrive or Dropbox vs Google Drive, but most users choose Dropbox due to its benefits. To gain a better understanding, let's start from the beginning.

Dropbox is a popular file hosting service run by Dropbox, Inc., a corporation based in San Francisco, California. It was founded in 2007 by Drew Huston and Arash Ferdowsi, both MIT undergraduates.

Dropbox has released changes allowing users to link their individual and commercial Dropbox accounts to the very same device, with each folder fully marked for personal or business usage, complete with its settings, contacts, password, and files.

Remote wipe, shared audit logs for business managers, and account transfers are among the new capabilities Dropbox has unveiled for its Company offering. It released a feature named 'Smart Sync' for Business and Enterprise clients that enables Windows and macOS users to access all files in their Dropbox folder yet with the access to download only specific files on demand, as a result, several popular tools, such as Troop Messenger, Salesforce, and so on prefer to include this service in their list of connectors.

• It has many features that can work with both Microsoft Office and Google Workspace documents.
• Encrypts data in transit with SSL or TLS and at rest with AES 256-bit encryption.
• Passwords and time limits can be put up to share files and folders.
• Supports block-level or Lan, as well as fast servers and syncs thanks to loc support.
• It has all of the basic file searching features, as well as the capability to manually start items for faster access.
• File synchronization, client software, personal cloud, cloud storage, and other services are available.

I hope you now understand why some people choose Dropbox over its competitors, even though it is more expensive.

The original version of my answer received a lot of attention. Unfortunately, some aspects of the post were misinterpreted and misquoted on twitter and other blogs: 1) I never said or meant to imply that Syncplicity lost to Dropbox. Syncplicity is a alive and well, has a great and growing service and has added a business edition to their product line. 2) I was writing about the year 2008, not about today, specifically the couple of months around the Syncplicity launch and the Dropbox launch, almost 3 years ago. 3) I was one of the three co-founders at Syncplicity, not the CEO and I haven't been with the company in ~2 years. Some of the posts others put out there said otherwise.

My earlier version of this post was about how Syncplicity and Dropbox competed for mindshare back in 2008 when both companies launched. My initial Quora post was about some of the reasons why, around our respective launches, Dropbox was able to get more attention. 3 years ago, the press and early tech adopters were starting to fall in love with Mac products. The average consumer didn't have a Mac, but they were hot amongst influencers. Having a Windows-only product dramatically limited the attention Syncplicity received from the press. Today, I can't imagine launching a desktop app without Mac support. When we started developing Syncplicity, it wasn't obvious that Mac support was critical for press attention. Today both companies have Mac clients.

After its initial launch, Syncplicity figured out how to better manage its larger feature set and added an offering for the enterprise, so you'll also hear about them in the business space today.

Here's a response I got from a friend on Facebook:

I use both. Dropbox works better when you're sharing with others mainly because it syncs to the cloud so you don't have to make sure someone picks up your changes before you close your laptop and head home or jump on a plane. Of course, you could run LiveSync on a machine that's always online, but that's what the cloud is for. ;-) Also, Dropbox does backups of every change, which is nice when someone in your group accidentally overwrites a file, or, worse, deletes the entire folder and overflows the Live Sync trashcan (which has happened to me).

What DropBox did is what Steve Jobs would have done if he wanted to build this kind of software.

See here how he did when Apple built iDVD software: http://www.fastcompany.com/magazine/147/apple-nation.html?page=0,1

Simplicity is the ultimate perfection!

Phil Schiller, Apple’s longtime head of marketing, put Evangelist on a team charged with coming up with ideas for a DVD-burning program that Apple planned to release on high-end Macs–an app that would later become iDVD.

He and another employee went to work creating beautiful mock-ups depicting the perfect user interface for the new program… On the appointed day, Evangelist and the rest of the team gathered in the boardroom. They’d brought page after page of prototype screen shots showing the new program’s various windows and menu options, along with paragraphs of documentation describing how the app would work.

‘Then Steve comes in,” Evangelist recalls. “He doesn’t look at any of our work. He picks up a marker and goes over to the whiteboard. He draws a rectangle. ‘Here’s the new application,’ he says. ‘It’s got one window. You drag your video into the window. Then you click the button that says BURN. That’s it. That’s what were going to make.’”

Dropbox is better adapted to our times.

1. People still (for now) want a copy of their stuff locally. A lot of people are uneasy with a 100% cloud approach.

2. We don't have access to the internet all the time. Let's be realistic, wifi and connectivity of all sorts have come a long way, but we aren't yet in a 100% connected world. By leaving a copy of the files locally, a user can still have access to them.

3. People aren't disciplined to backup their stuff. Dropbox doesn't need user intervention to sync the files. Install it and forget it.

4. The freemium and shared folders helped a lot to spread the word out.

They were the "first mover" in cloud storage, they offered it freemium, and you could get your files on any device, anytime. When Dropbox began, they offered additional space to any user who could get another person to start an account, and that gave users who were new to cloud storage plenty of space for free. Never had a sync or access problem. Menus are simple. What's not to love?

Others, like Google Drive, are fine. But once you've got your files in one of these cloud storage thingies, why bother moving them to another? You could have a bunch of free accounts with all the competiters, but why go through the hassle of remembering what files you put where? And keeping tracks of the accounts and passwords? No thanks.

Dropbox was the first online storage out there, and they did everything right, right from the beginning. I rewarded them with my business, and I suspect they'll be in business long after Sugarsync and others fail.

I am little late to this discussion, but would like to give my two cents. I am a developer and I use dropbox religiously to backup my work. It has been a tremendous asset to my workflow and allows me to work on multiple machines easily. I like to compare Dropbox VS Competitors to Google Maps VS Apple Maps.

I decided recently to use Google Drive together with Dropbox to help save on free space. I expected Google Drive to work just as Dropbox. I was horribly wrong. It crashed numerous times, and would constantly battle to sync files. The error messages were anything but clear. But I still persisted.

The last straw came when my harddrive failed. I restored through timemachine and had my machine back up and running in no time. Except for Google Drive. It would not sync my local folder with my folder online. You can read more about it Google Groups. Simple problem but no solution.

Anyway, Dropbox not only came up with a brilliant solution to a common problem first, but the engineering behind the product is reliable. Thats why it works. Just like Apple learned, its not a simple task to simply try copy a product and expect it to work the same. When it comes to software, you can never ignore reliability. Its the single most important thing and something thats extremely hard to achieve.

Apart from the "It just works!" reason, I'd like to point out two things that made me choose Dropbox and not other similar services:

1. There's an official Dropbox application available in almost every mainstream desktop or mobile platform: Windows, Linux, Mac, iOS, Android, etc. I tried to use Google Drive at first, but I had to discard it because I couldn't find a reliable client for my Linux PC.
2. I had also tried Ubuntu One, the cloud storage made by the Canonical, the same company that develops Ubuntu Linux. However, they discontinued the service in 2014. Dropbox's main business is cloud storage and they are the undisputed leaders in this market, so there's little chance that they decide to shut it down, as it happened to Ubuntu One. Also, who knows if Microsoft or Google decide to discontinue they cloud storage systems?

I am a long-time Dropbox user, and I've referred enough people to Dropbox that I have many extra gigabytes on my free account. I have done pretty serious evaluations of various Dropbox competitors when considering options for my startup to use. In particular, I've spent quality time with Google Drive, Microsoft SkyDrive, Cubby, and iCloud. I think that I can sum up Dropbox's appeal in one clichéd phrase: it just works. With all of the other cloud storage apps, I've experienced buggy syncing at one point or another, and trouble getting certain features to work the way they ought to work. Dropbox's feature set also goes really deep, and its usability is generally more intuitive. It's easier, for example, to share a dropbox file with someone via a web link with Dropbox. Cubby, in particular, has made good strides and I think that from a reliability and usability basis it's almost there.

Now, each of these competing products has at least one key feature that sets it apart from Dropbox in a positive way:

Google Drive: integrated with Google Apps, which is really a terrific productivity suite for people who collaborate with others on documents a lot. Also: generous free tier.
Microsoft Skydrive: the ability to work with Office documents through the browser is a killer feature if you're a heavy Microsoft Office user. Also: generous free tier.
Cubby: The ability to create encrypted folders is a killer feature, and pushed me over the edge to use Cubby for my company, while I still use Dropbox for personal files. Premium tiers are quite a bit cheaper than Dropbox.
iCloud: I'm a long-time Mac user and iPhone user. Apple has never been very good at online services, and iCloud is generally pretty lame in comparison, feature-for-feature with Dropbox, but it's integrated tightly into the MacOS/iOS ecosystem, so you've got that going for you.

But all the features in the world ultimately matter very little if the basic, day-to-day use is a cause of consternation instead of delight, and Dropbox is heavy on the delight and light on consternation.