This was the entire premise of Airbnb; you get a cheap lodging (sometimes literally on an air bed), and the owner (optionally) might even make you breakfast. It then kind of evolved into a gray area, with some businesses essentially running large numbers of apartments. Many argue that at that scale, it is disruptive to others living nearby, and should be regulated as a normal hotel operation, etc.

Because presumably it's cheaper and a more personal experience than a hotel. Hotel's aren't going away if the idea of staying in a room in someone's apartment isn't appealing to you.

Vacation rental homes have been around long before the internet as well if you need a larger place to stay.

Have you never heard of a traditional BnB? The charm is a welcoming host, home cooked breakfast, a small group of like minded travelers to talk to, and unique accommodations. Usually there's 2-8 bedrooms. They've been together since the dawn of modern civilization.

As long as the host stays out of your way when you need (eg, anytime other than when you need them), it's rather quite nice. It's hard to beat the conversation you have over a glass of wine after dinner. I've made lifelong friends this way.

Sure, no one wants to stay in someone's studio with a wall divider, but thats absurd.

Why not? If you don't want that, get a hotel room.