Yes. It's because of the idiotic way the Dow formula works. The Dow is a price weighted index. To compute the value of the Dow, you sum the per-share prices of the constituents and divide by a magic divisor. So a $50 move in GOOG (~6.6% change) and a $50 move in AAPL (50% change) would have the exact same impact on the value of the index. The kludgey solution to this problem is just to not incorporate high priced stocks into the index.

Incidentally this is why when you hear anyone quoting the Dow you can tell immediately that they are either clueless or an innumerate moron.

The Dow is useless as a stock index. It's composed of only 30 stocks, so a big move in one of them (like when Caterpillar announced a restructuring charge and its stock tanked by 20%) will be reflected in the index even if it has nothing to do with the broader market. Also, the index tends to skew toward older blue-chips (hence the name "Dow Jones Industrial Average), so it doesn't reflect a lot of what's actually going on in the market. There's not a single Internet stock on it, for example: the "technology" sector is represented by Apple, IBM, Cisco, Intel, and Microsoft, and Amazon/Google/Facebook/even Ebay & Yahoo are conspicuously absent.

Anybody with any sort of financial literacy uses the S&P 500 as the proxy for the U.S. stock market. Even that has its problems, but it's a lot closer to meaningful than the Dow is.

No, but who would it replace? Apple was only added last year, and there isn't that much turnover on it. There currently are no pure online companies on there, and despite the role of tech in today's world, only a few companies in the space (MSFT, Cisco, Apple, IBM)