My sig (since 2002/2001) on /. has been "Why arn't you encrypting your email?".
The answer is simple -- there was never a critical mass of people exchanging keys nor was there an easy-to-explain web of trust, nor was there a simple, free reliable certificate authority.
In 2002, Outlook Express offered integrated s/mime encryption + digital signatures. Once you installed your certificate (which, was simply double clicking a .p12 file, and entering your import password), you could encrypt or sign email going out, with a single click. It verified signatures in inbound email too, all in an integrated UI.
No one I knew used it.
Even today; Windows Live mail + Thunderbird offer integrated s/mime encryption. Maybe 1 or 2 of my technically literate friends use it. And of those 2, i think only one persists using it to this day.
Back then, when all I had was my Palm Pilot IIIxe, I thought "Whoa. I hold in my hand a portable computer that I can use to exchange digital signatures with". I even kept my pgp key in a note I could beam to someone, given the chance. Never happened.
Nowadays, even AGP on Android doesn't let me exchange keys with someone meet on the street, on the off change they happen to use it. Secure key exchange would be a trivial problem for today's smart phones (provided the carrier isn't using carrieriq to swipe your data....), but there still is no critical mass to make this worthwhile.
And, with most folks using webmail, You'd have to come up with a hackish way to encrypt mail client side (pgp copy/paste to the clipboard? w/ Rich text? attachments?), or just hand your keys to your provider. Doing the encryption server side would make the service provider an easy target for legal and hacking threats.
It's a tough nugget to crack, and it's not going to be solved until mail encryption is as easy to use as Facebook.