https://support.google.com/webmasters/bin/answer.py?hl=en...
That all happened after hipsters squatting these domains cried Google a whaaambulance over not getting the search-rank they felt they "deserved".
Something else made these utterly pointless domains popular before that, but what that was, I don't know.
Possibly 'io' being short for input/output. The first .io domains I remember were some programmer blogs/personal sites. Now they are just over used.