They don't always do it. It's actually probably rare when they do, but there is no doubt, based on my own experience that they do cancel flights due to low volume occasionally.

As has been discussed in this thread they need to be able to "claim" a reason OTHER than low volume to be able to get away with it. In my case last December I'm sure there was some type of weather advisory issued for PHL. Southwest took that as an opportunity to cancel the flight out of DEN that I was to be on because it had a load of 31 out of 177. Neither Southwest nor any other airline canceled any other flights into PHL that evening. Southwest even had a flight out of LAS that flew at the same time and along the same flight path as my canceled flight. I am positive that if my flight had been booked full, it would have flown. (And no I was assured there was no plane swap or other mechanical issue with my plane. It sat at the gate, empty, the whole night.)