I think it ultimately comes down to this: playing games is more fun than watching them.
There are some games like Phoenix Wright or visual novels where a Let's Play is essentially the same thing as the real deal, but for most games the fun comes from doing it yourself.
Let's Plays are interesting for me because they've got funny narrations, skilled play, interesting commentary, secrets, stuff like that. I don't feel like they are a replacement for actually playing a game. They're kinda like DVD special features.
