If blur and grain help the concept of the photograph then I don't see the problem. Form follows function.
This is a long thread with many opinions. Most things that can be said about this subject probably has been said, but anyways, here are my $0.02...
Photography is a way of communication. As with verbal communication, where the actual words are just about 7-40% of what is communicated (depending on which source you use), the actual subject depicted is also just a small part of what is communicated in a picture.
If a picture is worth a thousand words, then how much is the equivalent of the tone of voice, the body language, the choice of clothes, posture etc worth in a photography?
Every way we change (on purpose or not) how the subject is depicted and what the final print will look like affects how, what and how strongly the photograph communicates the photographer's idea.
If we look at how photography is typically taught, through books, courses and the infamous "rules" of photography, such as the rule of thirds, that subjects should look/move in to the image, where bodyparts should be cropped, what should be in focus, the use of soft diffused light etc, these are not really rules at all. They do not define good photography, and they are definitely not something that can be obeyed or not. They are simply a way of enhancing a very narrow range of things that can be communicated about a subject, that is assumed that most people want to communicate through their images.
This is pretty much the equivalent of telling people that if they want to communicate their moods and emotions, they should smile, which is of course a very efficiant way to show off a very limited range of emotions.
Because the photographic rules are not rules anymore than "smile to show your mood and emotions" is a rule, they can not really be broken. By showing other emotions, we don't break the rule of smiling, we simply communicate something else.
So how does this relate to the original question of why one would "opt in for downgrading the quality THAT much"?
Well, if quality is measured purely based on what a set of "rules" say, then that is a valid question. But if photography, as I think, is a way of communication, then quality is not in how close to (what is often considered) perfect exposure, sharpness, tonality and details it is. It is instead a measure of how well the photographer conveys what he/she wants to say through the photograph.
Grain, different kinds of blur, different exposures, different compositions and lack of detail doesn't communicate less than schoolbook examples of photography. They convey something different, just as a frown communicates something different than a smile.
They are an essential set of tools if you want to build a toolbox that can communicate a wide array of emotions and messages.
Early in this thread there was a link to a picture of an "EPA Traktor" (this is a type of vehicle, rebuilt from a car, that is legally considered a tractor that some Swedish rural kids use for transportation since the legal age of driving in Sweden is 18 years, and these can be driven from the age of 15/16).
In Sweden, they are associated with Swedish "redneck" culture; rockabilly, high consumption of moonshine, a certain rebellion spirit and the typical redneck lack of a sophistication. It borrows a lot of elements from the American redneck/trucker/greaser cultures and combines it with Swedish rural culture.
Now, most people outside of Sweden wouldn't know what an "EPA Traktor" is, but I'm pretty sure that most people, when seeing this picture, get a certain feeling of many of those things that it is associated with here.
The dark, dull exposure with a lack of highlights, the composition, the cloudy sky, the grain and the blur all help contribute to a lot of the same associations that a lot of us Swedes get when we think of the typical "EPA Tractor" drivers in a way that a schoolbook picture of an EPA Tractor never could to an audience who doesn't know what it is or what it stands for.
So to wrap it up; grain, blur, under-exposure and other tools are tools for communicating. When used to enhance the message or emotions that the photographer wants to convey, they don't downgrade the quality, they add quality and they are essential tools in the toolbox for any photographer who wants to take control of what he communicates through his photographs.
There's a lot of repetition about "reasons" in the thread, however, I found an interesting historical fact that seems to be the start of this, as with everything someone has to set things on fire before the crowd follows. Probably there's more of the same to be found if one digs deeper, but this seems to be a good start.
Seems to me Robert Frank was an important trend-setter to this photography fashion, probably this opened up for others to start working with this kind of expression as well.
"His style of photography was also under criticism. Popular Photography said the images were “meaningless blur, grain, muddy exposures, drunken horizons and general sloppiness.” It was a completely different style than what people had seen before. Before Frank came along, the composition of photographs had been straight – either horizontal or vertical and the subject was always obvious. You knew what the photograph was about. Frank changed that. He was not looking for technical perfection. His pictures were messy and grainy, and he purposefully used obscure lighting."
i think you have to go even farther back to maybe the turn of last century
the art nouveau movement, art for arts sake and the yearning for photography
to become painting ... the pictorialist .. (bromoilists and others) created photographs
that had blur and motion and grain as they transformed their photographs into other things.
i did this one over the summer, and it remained in my camera until yesterday ...
since you aren't able to get into the gallery here ... ( and a tip of the hat to bill b )
Very interesting indeed, I think my main "quest" here is to figure out how this started in the documentary/journalistic genre, but of course the genres you mention must have influenced people like Robert Frank and for sure others. Would it be possible for you to dig up and link some old historical master blur from that genre, I'd love to see that!
In general, though, documentary/journalistic photographers have always had to deal with existing light, and in the early days often slow lenses and slow film. Blur and grain has always been part of the genre, although it is of course hard (or impossible) to say when it has been for stylistic reasons and when it has been necessary in order to get the shot at all.
Would it be possible to add one more qualifier on to here?
You've qualified photographs based on how well it conveys what the photographer wanted (their message). Could we add another qualifier that is the quality of the message?
A communist photographer might have made a photograph communicating how great Mao Zedong was, and in such a way demonstrated his own skill in photography (skill communicating his message through the medium), but we would not call it a great photograph because the message is poor. (keep in mind I'm not taking away a level of appreciation of the photograph)
Take for instance this legendary photograph of the Soviet Flag on the Reichstag.
It is a very powerful image of victory. But does it convey the victory of communism, or merely the defeat of the German Nazis?
Well, the intention was certainly at least partly to intimidate the west and show off Stalin muscles. But did it? And does it now after the fall of communism?