I think people carried guns and used holsters for the same reason we do today. For self protection. Someone who carries a handgun for self defense doesn't know when he will need it. The holster needs to carry the gun securely and enable to user to retrieve it quickly if necessary. Same as we do today.
While the scene of two "gunfighters" meeting each other in the street at high noon might be laughable, the idea of one or both participants in a gunfight drawing their guns at a moments notice is certainly plausible. The only thing that has changed is technology - better guns, better holsters.