I have thick black hair as do some of the gymnasts and even a very good wax will leave me with redness and the odd ingrowing hair. Also they are often young girls and at that age I would have been self conscience about wearing a leotard.
I don't think people who would be self concious about wearing a leotard would go into gymnastics. That sounds horrible and I don't mean it too, but it is a very "look at me" sport. It takes a lot of effort and when you're training, you want someone to look carefully to make sure you're doing it right, and when you're performing, you want to show off that incredible form. I think you'd get very used to wearing a leotard and would feel normally dressed - just as people do in tiny bikinis, etc.
I've got fine blonde hair so we're coming from opposite angles here, but waxing has never been an issue for me. I suppose they could shave, or some of them just might not be very hairy. It is their choice, but I think complete hair removal is quite common these days. Not everyone does it, but it's definitely more popular than it was.
But if it was me I would want the option. I choose to wear shorts for swimming.
I think that probably reinforces that it's a confidence thing, and gymnasts tend to be confident. They should be, really, and they tend to be in incredible shape. I don't think you'd do gymnastics if you weren't, it'd be uncomfortable having the teacher and other students watch you train. You definitely wouldn't compete at this level!
I'm all for it, young girls should be more confident. Far too many people are crippled by insecurity (myself too, at times!) and it's lovely to watch the gymnasts do amazing things and seem to be really enjoying themselves.