Just like everything else, there are people who are extremely passionate about music and have the ability to hear the difference between various systems. I've visited high-end equipment stores and listened to those expensive setups and I have to tell you that they are absolutely incredible for 2 channel music. A home theater system cannot equal that quality.
Additionally, many people enjoy finely made things, whether it's cars or guns, and they are willing to pay a premium even though they may not perform any better than a mass produced product. For example, I carry a handmade knife by Crawford that is finely detailed and costs nearly $1000. It doesn't cut better than a $100 knife but I love the effort that went in to making it and I enjoy using it every day. The same can be said for the high-end audio buffs who just really enjoy finely made equipment.