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Because it's neat. It used to stand for 'internet' ie original iMac. Although the 'i' grew to stand for so much more, mostly I as in self, as in the iProduct you're using is an extension of yourself. Now it's mostly for branding.
 
The "i" originally stood for internet, however, it was soon turned into a consumer product designation (iMac, iBook, iPod, etc), but Apple has now turned to throwing it where it sounds cool instead of for indication of consumer products (like the MacBook).
 
Before Steve begat the iMac, there was eWorld (1994) and the eMate (1997). I believe these were Apple's first two lowercase products.
 
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