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In a box office/economic sense, Paranormal Activity was successful largely due to word-of-mouth. Just two weeks after it's release, the movie had barely grossed $2 million, which is unimaginably low for any film the very first night it's released, let alone two weeks after opening! The critics gave it very high marks, extremely rare for a horror/thriller film, so that made people want to go see it. And as with any movie, word-of-mouth is one of the best marketing strategies there is, and obviously people liked what they saw.

I liked the movie and didn't find it to be especially frightening, but it's one of those movies that makes you think. Not necessarily about the paranormal, but it makes your mind wonder about what could be happening in/around your house while you're in deep sleep. We have all heard strange noises in our house at some point, whether we're wide awake or slipping into sleep. This movie gives you a plausible (if you believe in the paranormal/unexplained) reason as to what could possibly be causing these noises.

In the end, as with any film of this theme, it all comes down to whether or not you believe. Most people believe that ghosts/spirits exist, although most have not seen them. If you're not someone who believes in these things, then the movie can be seen as being foolish. But if you believe in the possibility of the paranormal, then the movie would certainly have your mind racing!

The previews for it. Same reason Blair Witch was successful.

it came out at a time when people really wanted a scary horror movie so they where willing to pay for anything

I think the people who liked it, did so because they like the idea that it may be real.