You kids...
<crotchety>Back when _I_ started editing, every portal had its own Directory. Even in them days, Yahoo were the largest, it were....almost half a million listings, and hundreds of thousands of them weren't dead nur hijacked already, either. That was before Looksmart -- them guys copied Yahoo's listings, and ourn, too (and wurn't I surprised to see some of my own misspellings show up with Looksmart's brand on them!)
But Yahoo waren't alone: AOL had its own, Netscape had its own (to go with its own independent company -- that war before Bill Gates decided he had to own every electron on the internet.) Lycos had one too, and all the other independent search engines that were spammed out of existance by VStore/SMC/whatever their name is today--besides mud--and their greedy idiot helpers.
Them folks were paying big money -- tens of millions of dollars a year and more, apiece -- to build their piddlin little directories. Figgered they had to have it, whatever the cost. The ODP (Gnuhoo, it war called, before Yahoo objected to its last syllable and the FSF objected to its first) was a breath of free air. A handful of very bright techies, and a dozen crisp new Sun Servers, and a carefully built but free community, was by far the cheapest way of building a directory. Best, too, looks to be, but reckon us editors cared more about that than anyone else.</crotchety>
Of course, things have changed a bit since 1999. New millenium, and a new breed of spammers to trash any search engine's results, and a new breed of search engines with a tiny bit of genetic resistance to spam -- Looksmart went sucking PPC off of Bill Gates' midden, Yahoo de-emphasized its directory, and everyone else uses the ODP or gets along without.
Granted, the new search engines are good, and a lot of people get along fine without a directory. But for certain classes of queries, dmoz.org site search is still far and away the best tool.