There are a lot of busy, working parents who simply don't have the time to hand-school their kids, so regular, government funded schooling is the option.
You learn a lot of social skills in regular school that you miss if you are homeschooled.
Homeschooling works well for kids who learn at a much faster/slower rate than kids at school, or who doesn't learn effectively by the methods of tests & homework.
Not all kids learn at the same pace, learn with the same methods.
I go to a normal school. It's not too bad. If I were homeschooled, it would suck for me though because I'm really unmotivated and lazy and I need the pressure of tests & exams to keep me working. It works for me.
However, if you have a different mentality (whether too smart or too stupid) than what is considered normal, regular schooling would not work and the alienation you'd suffer is quite cruel.