Here's why I think people liked the game: It's a game about clicking cows. People were told it was a game about clicking cows. Thus, it attracted people who figured they would, for some reason or another, enjoy clicking cows. Since the game's premise was so simple, almost everybody who played the game got exactly what they expected, and since people don't generally play games they expect to dislike, Cow Clicker was enjoyed by most of the people who played it. Thus, the game got good reviews.
It also helps that the game didn't have all that much of a time investment. The core game, ignoring for a moment the premium features, had little to no cost to the player in terms of time or effort. The premium features were optional, and it was always given in advance what the precise benefit of paying for them would be. Thus, if a person thought the feature was a ripoff, they wouldn't buy that feature. This is the gaming equivalent of a tofu sandwich, as compared to a lobster dinner. Sure the lobster tastes better, but you don't need to pry open a sandwich and it's still filling, if not that tasty. Hence why games like this and Farmville are popular. They grant a small sense of achievement in exchange for no real cost, as opposed to granting a large sense of achievement in return for a medium cost. So in terms of cost versus value, this style of games seems to win, at least in the short run.
In the end though, I don't think it will be a real problem for the industry, as long as an effort is made to delineate applet-style games like this from deeper games. They're basically two different concepts springing from the same idea, not just different genres but actually different activities entirely. It is probably possible for both kinds of games to exist, just like how a person can enjoy both books and magazines on their own merits. And of course, video games are a relatively new medium. Once they're established enough for video games to get their equivalent of the Louvre, the delineation between artful games and non-artful games will become clearer.
(I probably went on a bit much here. Sorry, but I was actually working all this out as a typed it, and now that it's typed I don't see much point in deleting it. And needless to say, this is mostly a combination of opinions and guesswork thrown together at one in the morning, but hopefully I managed to make a valid point here somewhere)