Why was Apple making their own Java in the first place?
Probably to make sure OS X could support Java apps as soon as possible (was their Java version in OS X.0? I don't remember); back when OS X was in its infancy Java was more common, and I expect it helped a lot of companies in their transition to OS X since they could implement some, or all, of their app in Java for several platforms.
Basically I think Apple just went all out to try and make sure developers didn't have many excuses
not to start developing for OS X in some form or another.
The real question is why they didn't hand over responsibility to Sun/Oracle sooner, since Java apps are so much less common.
Personally I use Java for OpenFire (free Jabber server with support for transports, e.g - MSN, via plugins) and GlimmerBlocker (ad-blocking proxy server). Not super common apps, though GlimmerBlocker is good for everyone since it works with any browser.