Several reasons:
I think a big part of it's popularity is due to there being very little cost to participate. No pads or balls...
All you need is one other person to wrestle with so I think it takes hold in small towns that do not have loads of kids to field an 8 team football league.
Small schools sometimes dont have enough kids who ar ebig enough to truly compete in football. But if they have a few guys for each weight class and a mat to practice on, they can have a wrestling team.
There are a LOT of small towns in Iowa and the Midwest. Even in Pennsylvania, outside of the Pitt and Philly, there are a lot of rural areas in that state.
You can wrestle at almost any size. It is a great sport for kids who are considered "too small" for other sports. There are some might tough 112 lb kids out there and they all have a chance to participate against kids of their own size.
I never thought about it, but being an indoor sport inthe winter is deffinitely a plus. In the south and other warm weather areas they play football and baseball year round. We can't do that in Iowa and most of the midwest.
It is the ultimate individual sport. Your team and coach can be important for preparing you, but once you are out on the mat it is just you and your opponent. Let the toughest person win.
As far as the state tournament, it is grat because it doesn't matter what school you go to or how good your team is. You can be a champion all by yourself. In football or baseball, no one guy can win the championship by himself. In wrestling you can and that is awesome. Your only limits are how hard you want to work yourself.
I personally have a special love for the sport of wrestling. It very much made me the person I am today, and I wasn't even very good at it. I was well on my way to being an obese teen with self confidence issues and a poor outlook on life. I took a chance and joined the wrestling team, lost 45 lbs my first season and reinvented myself. The toughness and comraderie I learned just from surviing grueling wrestling practices gave me so much more than I imagined. I was never great at it. My team was horrible. But I owe a lot to the sport.
For those that don't get it, I understand. Unless you have put in the hard work and gone through it, it just looks like a couple dudes rolling around. I initially had my qualms about putting on a singlet and grapling out there. My advice is to keep an open mind. It is really the ultimate contact sport. One where you can really show how tough and strong you are.