Isn't 128 bit security enough for most practical applications?
Why do people buy red sport cars ? They do not go faster than sport cars of any other colour...
AES comes with three standard key sizes (128, 192 and 256 bits). Many people see this and think that if there are three distinct sizes instead of just one, then there must be some difference, and since the 256-bit version is a bit slower than the 128-bit version (by about 40%), it must be "more secure". So they go for "the most secure" and choose 256-bit keys.
In reality, the AES has three distinct key sizes because it has been chosen as a US federal algorithm apt at being used in various areas under the control of the US federal government, and that includes US Army. US Army has a long-standing Tradition of using cryptography, and that Tradition crystallized into internal regulation with all the flexibility and subtlety that armies around the world constantly demonstrate (just listen to some "military music" and you'll understand what I mean). Unfortunately, this happend quite some time ago, before the invention of the computer, and at that time most encryption systems could be broken, and the more robust were also very hard and slow to use. So the fine military brains came up with the idea that there should be three "security levels", so that the most important secrets were encrypted with the heavy methods that they deserved, but the data of lower tactical value could be encrypted with more practical, if weaker, algorithms.
These regulations thus called for three distinct levels. Their designers just assumed that the lower level were necessarily weak in some way, but weakness was not mandatory. So the NIST decided to formally follow the regulations (ask for three key sizes) but to also do the smart thing (the lowest level had to be unbreakable with foreseeable technology). 128 bits are quite sufficient for security (see this answer for details). Therefore AES accepts 256-bit keys because of bureaucratic lassitude: it was easier to demand something slightly nonsensical (a key size overkill) than to amend military regulations.
Most people don't know or don't care about History, and they just go for big because they feel they deserve it.
When you are building a security system you need to plan on failure. This is the idea behind a defense in depth strategy.
Cryptographic primitives become weaker over time. Although a 128 bit primitive is plenty, a flaw could be uncovered in the cipher which reduces this level of security. So you need to add a security margin when the underlining primitive fails.
For example md5 produces a 128 bit hash, however using a chosen-prefix attack an attacker can produce a collision with a complexity only 2^39.
I didn't see this mentioned in the answers or comments so I thought to add this as an answer. Key size does not always correlate directly to complexity of an algorithm. A common fallacy is to assume that a message encrypted using AES256 is more difficult to crack (an adversary getting any sort of meaning information given only the ciphertext) than the same information protected using AES128. It makes logical sense that a larger key size provide introduces greater complexity but as with any systems, implementations are subject to weaknesses.
Assuming you're talking about AES 128 versus AES 256, there is a known weakness in the key expansion function that affects AES256. Fundamentally, the weakness reduces the complexity of AES256 to that lower than AES128. There's a similar attack for AES192 as well, though in this case, the complexity of AES192 remains greater than AES128.
Moral of the story, people don't understand crypto... j/k (I'm not a mathematician). Reality is that people assume "big" with "secure." A big gun is better than having a small gun. Larger key sizes are more secure than smaller key sizes.
In reality, the implementation of crypto is more important than key size alone.
FWIW, NIST draft on post quantum crypto is recommending 256.
Eventually you run into a problem similar to compression software, too much compression can lead to data loss. While there is no finite number to the strength of encryption "theoretically" that doesn't mean you need to encrypt your data more than 256bit. You might technically be able to do it, but at the risk of what a machine that takes a month or years to boot up and load your os?
I'm assuming you are talking about symmetric cryptography. The answer is that it is never secure enough (even though I suspect that using 256 bit vs 128 bit keys is a marketing strategy to make the client feel more secure).
And don't forget the rise of quantum computing, which significantly lowers the amount of time needed for a brute-force attack.