I think a big part of why Demo Day is run like this is because good products do not speak for themselves.

Investors are often not the target demographic of a particular product and given the range of products (wedding registry app, logistics/shipping software, developer tool for checking insurance claims, humor website, etc) most YC companies have chosen to show traction as a proxy for both demand for and quality of, their product as well as the execution ability of the team.

As others have pointed out, this is a great way to get an investor interested in learning more about the company.