You think it's stupid. I think it's stupid. There are quite a lot of people out there who do not think it's stupid. There are people who want to play a game like WoW, but do not have the time to invest grinding their character to max level and collecting all the gear they'd need. Buying it, to them, makes perfect sense.
There are two problems with it. The first is that it encourages people to continue selling the characters. Organizations like raiding guilds become reluctant to hand out loot to characters that might change hands and leave the guild, taking all that stuff with them. The second is it increases the level of incompetence rather drastically. If you have a level 70 rogue in Wow, equipped for high end raiding, and the player has run that character since level 1 and manually collected all the gear it has, there's a pretty good chance the player knows what he's doing. Someone who bought the character yesterday won't know left from right in a raid, probably will have problems in pick up groups, and generally will be lost in situations that require the player to know what to do, right now.