Compared to other forms of gambling, skin betting is relatively new: it is only around 4 years old. Its history can be traced to CSGO’s “Arms Deal Update” which allowed virtual weapon skin trading.
At first, when the Steam Community Market opened, players could purchase or trade skins with other players. There were also designated item drops in the game which allowed more opportunities to get wanted skins. From the beginning, these skins only provided cosmetic value for the game.
Later websites where you could trade these skins started forming (Drakelounge, CSGOlounge). They were easy to start using as you could log in with your Steam ID. This simplified the trade and skin gambling. Of course, the formation of these websites got mixed reviews as some people regarded it not so well. Either way, these websites still work and get a lot of visitors who wish to gain more skins.
That is the main reason why this gambling is still popular: the opportunity to get not only some extra money, but also skins that will make your player look amazing.
Even though skin gambling was disregarded at first, now it is more popular in various social circles. If you are about to start, try out Drakelounge.