The reason SaaS is catching on and will continue to catch on more and more is because people don't want to have to use two different products and developers don't want to have to maintain two different products.
I don't want to use a web-based application to look at my email online, then a client-based application to look at my email offline. I want to use just one application. One way to be sure I can view my email in the exact same application online and offline is to use a SaaS application.
The other point is lock-in in terms of the operating system. If I am over at a friend's house, and I want to check my email, I am not going to want to have to configure his email client with my account information just to check email. I am also not going to want to install software on his machine. Chances are, if he has Internet access, he's got a web browser. It doesn't matter if he's on a Mac... a Linux machine... or Windows... or which version of Windows he is running... I can visit Gmail and have the same experience as if I am at my machine at home.
This is the point of SaaS. It isn't that installing software is difficult, it's that it isn't always appropriate. I can create a spreadsheet in Google Docs on a laptop with Windows XP... I can then go to a friends house who might not have Office installed and is using Windows Vista... and can instantly have access to my spreadsheet (without having to carry a device around with me) and am instantly familiar with the interface to making edits, because it is exactly the same as when I created it. No software needs to be installed. It's just a service.
Then, I can be traveling and not have a computer with me and decide to view and make changes to the spreadsheet using my mobile phone. There was no special software to buy. If I visit a friend on the other coast who uses a Mac, I can then load up my spreadsheet and start working on it there. No need to ask if he has Office installed on his Mac, or be concerned about a file not being quite compatible, etc...
This is the flexibility of SaaS. The OS doesn't matter. The hardware doesn't matter. It doesn't matter if it is a desktop, a laptop, or a mobile phone. When Microsoft Surface comes out, as long as it has a web browser (IE probably,) I know it will already work with all of my "applications" that are web based.
The fact that these things are free is just an added bonus.