Welcome to Flyertalk!

You'll find many of your questions answered in the Stickies (located at the top of each forum). It explains the science/art/logic behind this.

Some people do it for the miles, some people do it for status. It depends on each individual's needs and requirements. Yes, it may seem crazy (plenty of threads/discussions about the sanity/logic re. this have been done) but if you find that it makes sense for your needs, then it makes sense.

Personally, I've redeemed some business class tickets well worth over $8K, but only spent around $2K to get the miles for it. For the $2K and my time, I spent weekends in NYC, DC, Boston, even London, and Germany. Not a bad weekend trip to earn miles, get status, and save $10K in flights later on.