It's a perfectly reasonable question. Here are some answers:
Formula was created as a response to the problem of an oversupply of cheap milk, and especially whey as a by-product of cheese making. The dairy industry needed to create a market, so they did. It came when wet nursing was going out of fashion because some paediatricians were concerned about safety, and child care advice at the time was to separate mother and baby, for mother to not nuture her baby as she might, because "excess" love (ie normal nurturing) was considered to create a weak child.
Add to this the fact that women were now beginning to work outside the home far more than they ever had before and you reach a perfect storm of factors which created a perfectly receptive market for formula.
Because there was no limitation of marketing, it was advertised as superior to breastmilk. Doctors were paid to market it, and so it was received by parents as being health care professional recommended, and combined with strict regimental child care routines (feeding 4 hourly and so on) women suddenly found that for the first time in the history of humans, many, many women were physically unable to produce enough milk.
Fortunately formula was there to step in ;-)
Thus began a culture of formula use, and nicely lined pockets of the formula companies, thank you very much.
Formula has certainly improved over the past decades, thank goodness. I have a tin of formula which was found at the back of my in-law's garage that my FIL had used as a container for screws. It was from back in the 1960s (my DH and his siblings were mostly FF) and the ingredients are really scary. Mostly skimmed milk powder, oils and fillers. It states on the tin that it's "Nutritionally Equivalent to Mother's Own Milk". 
Thank goodness for formula, of course. I'm a big fan of formula - clearly it's a life-saving product in the right circumstances. And, if a mother chooses to formula feed, I'm all for that, too, provided she's working on proper information (otherwise it's not an informed choice, and that's not fair).
But here's some differences:
- Breastfeeding mothers are given significant protection against many forms of breast and other cancers (which lasts a lifetime)
- Colostrum contains a blueprint of the mother's immune system which is transferred to the baby at birth. Breastmilk passes on antibodies to the baby or child which are made to order - whatever is going around right now, the mother makes the antibodies and the baby gets them. A FF baby gets no immune system support whatsoever and is therefore far more prone to illness. A child's immune system doesn't mature until around 6 years so having his mother's milk supports this while his own body is being kick-started.
- Formula fed babies are significantly more likely to suffer from gastroenteritis, ear infections, eczema and allergies than breastfed babies
- Formula fed babies are being given a milk designed to build bulk (cows), not brains (humans). For this reason BF babies are able to reach their birth IQ potential which on average is around 6 IQ points higher than FF babies.
- FF babies are more likely to be obese through life (there are theories as to why but no actual real understanding as yet, but this is across all parents and styles of raising children).
- FF costs around £500 just for the first year, and many parents feel (erroneously) that formula is valuable for over 1 year, whereas this is almost always not true provided that the child is eating a good and varied diet. Yet follow on milk is actively marketed as a "protective" product. Just give vitamin drops if there is a concern for the same effect at a fraction of the price.
- Breastfeeding continues to support a child's immune system for as long as the breastfeeding relationship continues - whether it's a few weeks, months or years.
Breastfeeding isn't possible for everyone, for a whole load of reasons. For those mothers, the risks of using formula are irrelevant because the alternative is starvation (if a suitable supply of donor breastmilk cannot be found). So like I've said, I'm all for formula being available!
If you are interested in learning more about this there's loads of good books on the La Leche League web shop, but the best to start with is "The Politics of Breastfeeding" by Gabrielle Palmer: www.amazon.co.uk/Politics-Breastfeeding-When-Breasts-Business/dp/190517716X/ref=sr_1_1?ie=UTF8&qid=1318941244&sr=8-1