carl_townsend,
I think the main reasons are because it supports authentication and hence fits the purpose of billing, that is important for ISPs and because it can be carried over and terminated at different places. What do I mean by that? If you were only constrained to Ethernet, then you would have to either terminate the link at layer 3 close to the actual last mile termination point, like local exchange, where fibre is terminated at layer 2. If you use PPPoE, you can terminate your layer 3 link much further away and even in a different provider's infrastructure. Here in UK for example, most of the residential cabling infrastructure is owned by BT. But people can still have broadband provided b other ISPs. This is the way it works: A router/modem at home initiates a PPP connection that is firstly picked up by a BT router at the local exchange. From the username (the domain part specifically), BT router determines whether this is a BT customer or other providers customer. Depending on what it is, it redirects the PPP session to a specific LNS server or a border server that would redirect it to other provider's LNS. The end result is that even though two houses might have the same cable terminated on the same router, but their PPP sessions are terminated at different ISPs and billed accordingly. Ethernet on its own doesn't provide such flexibility.
