Lua is used a lot, but usually as a command and control language. Meaning that it is always used together with another language/system, where performance matters, both for runtime and development time, and memory constrains..

One of the the reasons that it hasn't caught on the server side is that the server engineers are lazy (in the friendly way), and have it easy. If you have performance problems, you can just throw more hardware to it. So Python is a decent choice, plus the lots of libraries/batteries included, make the life easy to lazy developers. Again, by lazy, I mean people that just want to use the stuff to create features, and not worry about fundamental stuff. The fun stuff is usually in large dataset processing scaling, database scaling, etc. where a single box is not the bottleneck.

But for mobile dev., python is just too much of a pig. I think lua will win when these devs. start moving to the server side. Mobile / embeded devs have to re-invent the wheel often, and are just use to it, so they are less lazy by definition (they are more likeley to just create a framework from scratch, then just use things that are already there).

But the current trend is the opposite, as more server guys are moving to client/mobile. There is more growth in the client/mobile side, so there is not much cross pollination going on upstairs.

Smart devs. are either solving interesting problems below in the embeded world, or above in large scale datasets. The middle stack (your average crud app), is left with more average types.

Since it takes a brave soul to start with a great language, which unfortunately doesn't have all the libraries that some more mature languages do, Lua hasn't found that great of usage yet in the server side.