Just like other phones, iPhones have their own advantages over others. People may love them because of the user interface, elegant design, applications and features, high quality materials, and good customer service. Although, like what others are saying, people may buy them as a sign of social status.
It also has established a reputation of being a great phone even when it first started out. The first iPhone was original, or at least one of the well-known pioneers of smartphones. This is why even before, everyone wanted one because it's new and it seemed very high-tech.
However, if you are going to ask me, a lot of smartphones have been released since then, and manufacturers are doing great. Cheaper phones today may have the same or even better features than iPhones. Although in the end, it's still the preference of the buyer that matters.