It’s like watching sports, except you also have someone cracking jokes and being effectively a stand-up comedian.
But also, you’re assuming people always actively watch, which is not always the case. I tend to play a game on my main stream, while having a stream (or vod) open on another.
In addition, it’s also a bit like hanging out with a friend and watching them play. It’s basically sharing stuff and experiences with others, which is fun, even if you’re not a direct participant.
…and also, as the other commenter mentioned, there are games which you don’t really want to play, but are still interesting to watch.