You had to be there in 1995. At this time, there were a few commercial Smalltalks but the biggest was VisualWorks from ParcPlace Systems. The marketers at ParcPlace were idiots - choosing to optimize for max dollers per seat rather than max seats. Any shop wishing to adopt Smalltalk had to pay a couple thousand dollars per developer for a license. Any developer wishing to learn Smalltalk either had to get hired to do Smalltalk or sink serious cash into buying his own license. So it was just plain hard to get a chance to learn it.
Also about this time, IBM was looking for a successor to COBOL for their business customers. They chose Smalltalk (smart) and developed VisualAge and made it so the same program could run without modification from Mainframes to AS400s to PCs. Smalltalk has a friendly minimal syntax and is easy to learn so it seemed a natural replacement for COBOL. The future looked really bright for Smalltalk. The companies that were using it were out-producing everyone else by a lot.
And then Sun showed up with Java. The gave it away free instead of charging for it. IBM took a look at it and figured two things. First they didn't want to enter a marketing war with Sun that was clearly planning to spend a fortune on the Java brand. Instead they decided to try to beat Sun at their own game - have the best Java on the market. Why not, they already had a great VM that ran on their whole stack - they just adapted it to handle the Java bytecode set. In fact, all of IBM's Java tools were actually written in Smalltalk for several years. Thus - if one wants to blame anyone for the rise of Java over Smalltalk - it is pretty easy to place the blame directly at the feet of IBM and their unwillingness to compete.
I love Smalltalk. I love coding in the debugger, being able to archive processes and restore them exactly later if they encounter exceptions, the amazing reliability. The economy of expression and the brilliant class library. There is a new resurgence in Smalltalk development thanks to Squeak. Newspeak, Pharo (which has some really beautiful UI skins), the new cog VM, Seaside and Gemstone, these are all projects working on addressing the historical shortcomings of Smalltalk including the poor OS integration (Newspeak has a slick native widgets integration and Pharo/Squeak have a new external code integration capability called Aliens), and deployment/scalability.
Anyhow, I don't mind that Smalltalk isn't popular. That makes it a secret weapon for me and I am really encouraged to see all the new development projects. Smalltalk is growing and advancing again and this is good because a lot of the best ideas in software (XP, unit testing, refactoring editors, coding assistants) all were developed in Smalltalk first and then filtered out to the rest of the world (generally in diluted forms).