Why do people buy preamps if they can directly connect amp to stereo source/phone/PC/tv?

3 reasons...

1. Source selection
2. Volume control
3. Fix/help impedence differences between source and amp

^^ In addition to that, a good preamp provides control over the interconnects and in so doing, allows the system to be more neutral. This function seems to be the least understood, but seems to be pretty important, otherwise the system only sounds as good as your cables.
The funny thing? People often talk about a 'straight wire with gain' but the truth is that straight wire can introduce colorations unless properly controlled! That is because wires have a dielectric, can pick up noise, can have stray capacitance issues and so on. There is a bit of mythology there...

A good preamp can introduce tubes into the sound.  I also have a passive pre with the same Alps Blue.  The tubes add a subtle difference that can be varied by rolling tubes.  Yet, the passive is no slouch either.  I am running balanced interconnects.  Your mileage may vary.

You have to hear it to believe it. Listen to a quality preamp, then try to bypass it, source right to amp. Even easier these days with digital volume control on Jriver. For me, the sound is flat without a pre. With my tube pre (Eastern electric mini Max), the sound is alive, plucked strings sound juicy, the violin is sweeter, everything has greater presence and life. It's truly the heart of the system. 

I understand your question, mrbananapeel. (It is assumed that your amp has a volume control). If you're a "purist" who would never use tone controls anyway, why insert all that added electronics? I have run a test switching a source between a preamp input and directly into my amps (one SS, one tubed) and with the preamp set to be as neutral as possible (tone controls bypassed) and volumes adjusted. I heard no discernible difference. Not even a noticeable increase in background noise (although I'm sure it could be measured) and I consider myself a critical listener.

In one sense, it is a tribute to the preamp that it introduced no listenable distortion. On the other, there was no "improvement" in sound, at least with my equipment and  to my ears, but the preamp, as other posters indicated, offers me extensive input (both analog and digital) flexibility as well as tone adjustment if desired, all of which I use. I know people who did exactly what use are asking, that is connect the source directly to the amp. I definitely use a preamp but you don't have to if you don't want to. - Good luck, Andy