Preamp - what's the purpose?

These days you don’t really need one IMO unless you have analog sources and still like records or tapes. I run my dac directly to my amp and it sounds great. I have tried two different preamps in my system and I keep going back to running straight from the dac. It’s not that it sounds like crap with a preamp in the chain but I find I lose a little bit of that air and transparency if going through the preamp. It’s that much more electronics and cables added to the signal chain that you don’t possibly need. Paul McGowan from PS Audio was always saying “the best preamp is no preamp” and I tend to agree with him. Although he did admit that once in a while a really good preamp could improve the sound sometimes but also said if you are not going to use a real high end preamp, you are still better off going direct from dac and I agree.  Then again it all comes down to personal preference and taste. 

Sitting a few meters away from my loudspeakers, the first watt alone gives me roughly 80db of volume. I think these amps are biased to expect the line level signal directly. Why wouldn't the designer do that?

So what's the point of adding a pre-amp? Why do people do it?

In a smaller system you might not need a preamp. If you have multiple sources (tuner, tape, phono, TV, etc) you might. Most sources cannot drive long cables very well; if you want the best you have to use monoblock amps so they can sit by the speakers, allowing you to keep the speaker cables as short as possible.

A good preamp can drive long interconnects without the interconnects imposing a 'sound'- so it can be more neutral. You don't need to sacrifice any transparency or 'air' with a good preamp.

The purpose of a preamp?

There are multiple reasons, depending on your setup.

1. Selecting between multiple sources.
2. Some sources don't have their own volume control and most power amps don't have one either.
3. Some power amps don't have enough internal gain to put out full power from a line level source and/or not all line level sources output 2 volts.
4. Gain can also be an issue with some recordings. LPs are a classic example where records with 15 minute long sides could be recorded louder than those with 20 or 25 minutes on a side.  I've also seen CDs recorded at unusually low average levels.  For those recordings you may need more gain than the power amp along provides.
5. The output impedance of a source and the input impedence of a power amp may not be a good match. Or, as already noted in a prior reply, interconnecting cables, particularly if longer, can adversely affect the sound quality.
6. A preamp can also imprint its own sonic signature on the sound quality. You may like the way a particular preamp sounds versus no preamp.

Even if your particular setup doesn't have any of the above issues, the only way you will know what you like best is to experiment.

@mlsstl Nailed it!