I think that online dating is useful as a tool for meeting new prospective friends/lovers/spouses. The embarrassment and frustration of chatting up someone you're attracted to only to find out that they're already spoken for is all but eliminated (dishonest web-daters notwithstanding). Nothing wrong with being chat-pals, if that's whatcha want. It seems though that most people on the few dating sites I've checked out, including yours truly, are looking for something a bit more real-world-oriented.
My biggest gripe about online dating is that the stakes are much higher than they need to be. If you make a less-than-perfect impression with someone you meet in a real-life situation where you might meet them again, you might have another chance with them. With online dating, if your first face-to-face isn't perfect, you might never see that particular date ever again. If your initial online message displeases a prospect that you haven't yet met , he or she might permanently block you. And many apparently promising online exchanges terminate in midstream for no apparent reason, leaving one to wonder what if anything one has done wrong.
In short, online dating seems to be a lot a lot more about marketing than "the market".
(I've also been told that the people on free sites like OK Cupid are meaner than the ones on Yahoo, Lavalife, etc., but I'll take that blanket generalization with the appropriate dose of salt).