It wasn't because people thought they were an insanely good close combat unit, or the level of firepower they could put out, but because of wound allocation and survivability.
The release of 6th edition removed the wound allocation shenanigans, so most people assume they are no longer any good....
Is that right? I don't think so. As a matter of fact, I think they may have gotten better.
So what exactly has made them better? There are several things-
1) Most people play lists based on what they read on the internet (I'm looking at you!). Because of this, a lot of people's armies are totally unprepared to have to deal with them. Some examples of popular lists online right now are plague cultists and 3 Heldrakes, daemon screamer/flamer spam, as well as 5 nights scythes and wraith spam (and now perhaps 3 Land Raiders with Banner of Devastation).
All are extremely capable lists that are largely incapable of dealing with a paladin deathstar. Regardless of what you may think, tesla cannons, wraiths, and baleflamers are not good for dealing with 2 wound terminators with feel no pain. I know you are going to say screamers will destroy paladins, but let's not forget warding staves exist.
2) The new psychic powers are a god send for paladins, specifically, divination. Since the primaris power (prescience) allows you to re-roll all rolls to hit, it makes paladins fantastic at shooting down fliers, with their 16 S7 and 12 S5. It also makes their overwatch devastating if anybody is foolish enough to charge them. If Coteaz is in your paladin unit, you can also get a couple other powers that makes the Paladins even more devastating- such as overwatch on full BS, the ignore cover special rule, or making an enemy unit re-roll successful saving throws.
3) Has the wound allocation change truly hurt a unit of paladins? Somewhat, but it has helped if you rock Draigo or another boss up front. Last edition if a vindicator or unit of S8+ AP2 weapons fired straight on a unit of paladins you would only be able to take one on Draigo and the rest would have the potential for instant killing paladins. In this edition however, Draigo gets to take all the wounds like the boss he is.
One of the main changes that people think hurt paladins is the inability to spread wounds around so you don't actually have to pick up any models till you've suffered quite a few. You can still do that to some degree merely by moving the wounded models to the back of the unit.
Ultimately, whether or not you think certain units are any good, I encourage you to think about what the changes have been and how they affect units you used to like, or want to take. Do some research, don't just believe everything you read on the internet! (hint, hint!)