I guess because its entirely a player driven economy. Players make your armor and your weapon and then you go off and you get killed by some unethical player killer (which I think is still punished in terms of an alignment system except during war) who then takes the armor and the weapon and pawns them off or uses them himeself. Items in Darkfall seem to be made by players, broken by players, used by players, and stolen by players. Also, it's not just your personal effects that can be taken. If you are one of those craftsman who is taking a load of clothing to market, you can be killed and your precious cargo looted making highwayman a more lucrative job.
Equipment isn't worthless or expendable, it's realistic. It comes from people, it wears out after a certain number of times getting repaired (just like real armor) and even if it wasn't stolen it would be breaking anyway. Armor and weapons hit things and are hit by things, they were never meant to be eternal in real life, yet games have made them so for the sake of convenience and the "cool factor." If you can afford to carry around a fancy looking sword then you clearly can afford to do so which is no less impressive than if you had a "rare" item in some other game.
I'd also point out that this is a game where you can build your own town as part of a guild, get into a war with someone else, and watch them win and smash your walls with siege weapons, take down your towers, and burn your town to the ground. Now that's vicious and evil, looting is mild by comparison which makes it all just part of the vicious, bloodthirsty, gaming experience B-)