In the old days, it was a way off increasing performance* and getting a unique looking machine, whilst spending very little money. Nowadays, it seems to fall into one of two camps:
1) A lot are 'art pieces' that people have built for them (see the Deus Ex bikes for something that typifies these), in a bobber style, because they like the aesthetic. Personally, I don't have enough disposable income to spend money on a car or bike that just sits in the garage and gets taken to shows a couple of times a year. It's a cliche, but I
buy bikes to ride. That said, I don't hate on the guy who buys a desmosedici and then never rides it on the track or takes it to the ragged edge on the road. Nor (as others have pointed out) is it any worse than the guy who buys a GSA with knobbly tyres and then never goes off the tarmac. It's not for me, but as E.O.T.D says, I'll wave to them if I see them out riding and I'll be interested in talking to them about their bike if I see them in a petrol station or at a bike meet.
2) A cheap and fun way to get a 'toy' bike out of something old that'd be a bit crap these days as serious bike. You can turn it into something a bit different and interesting for pennies, in your own garage. What GoGoGavin, IHWillys, and Dave.0 talk about, this sort of behaviour seems closer in spirit to the original reason/mentality of bobbed bikes.
*You know, to compete with all the Brit metal that was romping all over your lardy American bikes in those days.