For a hobbyist, they're quite nice for "I want to SSH into a thing, write my tools on Linux, and still have access to SPI / I2C / GPIO, USB, and whatever hats can plug into that." The Hat form factor, while not technically great and frequently overpriced, is also nice for distribution; both inside a team commercially and on the web as a hobbyist, it's a lot easier to share software and say "hey, buy this pi, this hat, and run this" than "fab this PCB / solder this bundle of nonsense to an ESP."

For a company, they're also nice for "I want to make an IoT device that's heavier weight than an ESP32 and/or I only want to hire Linux Application People and not Firmware People; what's the cheapest Linux module I can get that's widely supported, backed by a real company, and has regulatory approvals" - Pi Zero W. My understanding is this exact pattern is why it's harder to get them as a hobbyist.

I use them widely in automotive reverse engineering; ESP32 can and does work just as well or better for an end product, but for experiments it's really nice to have a self-contained appliance to SSH into and use SocketCAN on rather than some bespoke firmware project to manage and iterate on.

Given the price and availability issues I suspect the market is "correcting" a bit and companies are hiring Firmware People and switching to true MCUs in places they'd previously have avoided doing so, but it was definitely a thing for a long time.