It has been around, but it hasn't been in wide usage. Unetbootin isn't new. Now
it is getting wider distribution and support and before it there were similar
tools, even from Windows. There is a whole website devoted to it called
PendriveLinux.com. Some distros such as SimplyMEPIS have had the usb key thing
working for years and I think that PCLOS has included it since 2007.

As to why it isn't more common it is a mystery to me because as you say it is
the best way to go, both as a time saver and as a space saver. The idea behind
doing it from the desktop is a little different from Unetbootin's, although in
practice they amount to the same thing. When one creates a usb key from Ubuntu
and other distros it is with the object of taking a copy of the OS with you
wherever you go. Persistence is built in, meaning that you can install
applications and make changes and they will remain (unlike a CD which is not
writable). It is simply a way to take your favourite OS with you and boot it
from any computer.

This can be done with Unetbootin, but it takes a bit of work to make it
persistent as you have to setup the loop device which will be mounted so changes
can be saved. I tend to use Unetbootin simply to install a distro from because
it is quick and dirty. I carried my Ubuntu around on usb key years ago, but I
never had much opportunity to use it, so I stopped.