Item Squish- Why are we even here?

I know there's other threads about this topic, but stay with me for a minute here...

I started playing in WoTLK, and all through my levelling to 80, I never once felt a "huge" change in gear/hp/mana I had. When I ended Cata on my resto shaman, I had somewhere around 30k hp/mana unbuffed, and I'll guess an item level around 260.

My question is: Why was there even a need to quintuple the amount of hp/mana geared players have (My priest has 150k hp and 149k mana fully raid buffed, and it's not even the end-content patch yet!)? Was it just so players could go "30k DPS OMG COOL!"? Particularly with the "gimmicky" fights (Halfus, Alys, H Domo), that number can easily get to 80-150k DPS (when our bear tank picks up both adds on H Alys too).

I'm aware hind sight is 20/20, but I'm just wondering what the rationale behind it was. :)