The had arc, pak, zip, zoo, warp, lharc, and every Amiga BBS I got on used a different archive format. Everyone had a different opinion on which archive format compressed things in the best way.
I think eventually they decided on lharc when they started to put PD and shareware files on the Internet.
Tar.gz is used because there are instructions for it everywhere and it seems like a majority of free and open source projects archive in it. It is a more popular format than the others right now. Might be because it is an older format and had more ports of it done.
But I really like 7zip, it seems to compress smaller archives, before 7Zip I used to use RAR but WinRAR wasn't open source and 7Zip is so I switched.
With high speed Internet it doesn't seem to matter much anymore unless the file is in over a gigabyte in size. Even then Bit Torrent can be used to download the large files. I think BitTorrent has some sort of compression included with it if I am not mistaken. To compress packets to smaller sizes over the torrent network and then resize them when the client downloads them. That is if compression is turned on and both clients support it.