I've never seen the reason why these photo hosting sites came into existence.
For starters, it means the image exists in two places--on your device, from where you held it AND at some big server in the sky. Hopefully, anybody who did this was smart enough to retain their "original" copy.
It also means that anyone can rifle through your photos, looking for who-knows-what. They can also copy and paste the photos, sometimes attributing ownership to themselves, even claiming to copyright the photo YOU took.
There certainly is no need for photo hosting sites on this forum, where all you have to do is click "insert image" and upload from your own computer. And as full of spammers as this site is, I'm hesitant to post photos here. Apparently there is no verification done on new members.
Because disc space was very small and very expensive when things kicked off and image files were huge
I was involved with a web server run by a friend.
He used 1000 x 500 mb SCSSI disks for storage @ $ 300 each.
In those days we only had 8 bit words which effectively limited the accesable disc size to 400mb and the other 100 got chewed up with the disc directory.
Thus no web servers could afford to have a lot of photos hosted and remember line speeds were 28 kb/sec so an image could take better than a full minute to download.
To efficiently store an image you needed to format the hard disc differently to one that was only going to store data
So the internet would have choked to death with multiple images hosted on multiple sites.
The initial forums were nothing other than an email distribution system and Yahoo groups is about the sole remaining example of this type still running.
If you have been a member of a Yahoo group you would notice that posts can only contain text and images are kept on a separate drive which to the viewer appears as the photos folder.
Same with text files , graphs & charts.
The page you see before you does not exist anywhere but on your computer.
HTML , the internet language is in reality a desk top publishing applications that drags files off one or more servers then puts this here and that there on your computer.
Things changed when we went to 16 bit words and drives up to 32 Gb could be used
The current , just superceeded 32 bit word allows hard drives up to 120 Gb.
Current top end computers running 64 bit words allows drives up to 60 Tb
Thus up till around 2000 sites like photo bucket were essential for the internet to grow and in reality if all of the hosted images were moved to all the drives of the servers that they appear on the web would probably grind to a halt till every host quadrupled their discs capacity.