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You might say it died out because it "wasn't as good" as modern piston engines, but if you did say that, you would be wrong. It was different.
It had plenty of weaknesses, but the fact is that most are exaggerated for a number of reasons. Even with those exaggerations, it's amazing that this motor performs as well as it does in a modern market, given the considerably smaller amount of development attention that it received over the past 45 years.
At least in its current incarnation, the rotary's real strength is in racing -- it's light, real light. Mazda is the only Japanese car manufacturer in history to win the LeMans, in 91, with, you guessed it, a 4-rotor. The next year rotaries were banned from the race.
In naturally aspirated form a rotary will take a beating for many tens if not hundreds of thousands of miles more than a piston engine -- because there is NO VALVE TRAIN and the mechanical motion in a rotary is smooth and cylindrical, not violent and jerky.
Some of the major reasons rotaries have received a bad reputation include the following:
1. They are most identified with the RX- line of sports cars. 'Ever heard of a sports car being unreliable? 2. The most popular of those cars, 3rd generation RX-7 (the "FD") used a 2-rotor sequential turbo system. Using an NA 3-rotor would have maintained the same weight distribution, would have provided better torque, and would have been enormously more reliable, but having an NA motor doesn't sound as cool for marketing purposes as having a "twin turbo." This was a big mistake on Mazda's behalf. Rotary engines are notoriously difficult to tune when boosted. A small malfunction in the vacuum system could blow a motor, or more commonly, a anxious and naive performance enthusiast would install one-too-many aftermarket parts, leading to a lean fuel mixture, and BAM goes the motor. This is not a problem you see in piston engines, and unfortunately many people did not understand this difference. 3. General dislike for anything different -- as I'm sure man of us have noticed, car people are notoriously judgmental of other brands and setups. The rotary motor is a prime target for such unfounded scrutiny.
Really, I'm just sad to see such an interesting technology with so much potential disappear... but the Rotary engine attracts a very unique crowd of the engineering-type, and we're not likely to go anywhere anytime soon.