High-speed rail can absolutely compete with short-haul flights between (some) European cities.
People take the train in the same situations when they drive a car, and travel time isn't always the most important criterion.
Not always. I live on the south coast of the UK. If I had to get to Scottish cities such as Glasgow (450 miles) or Edinburgh in a single day's journey I would fly or take the train, but never consider driving - it would be an absolutely horrendous car journey (edit: at least 8 hours assuming perfect traffic).