There are many conspiracy theories around nowadays, from UFOs to the death of Princess Di, to the assassination of Kennedy, and so on...
The UFO one is a perfect example of why conspiracy theories are so popular and widespread. The US government spread rumours of UFOs to cover up test flights of secret planes and so on, then they denied the rumours when they started to get out of hand, then they acknowledged them again in the hope of getting rid of them for political reasons, and then denied them again, and so on. This constant change of story is common with governments who will say one thing one week, then say the complete opposite later on, depending on what they are trying to make you believe at that particular time. So it is no wonder that many people doubt anything they are told by their governments and tend to believe the exact opposite of anything that they are told officially.
Stories of men from outer space became popular in the 60s and 70s when space travel became more realistic, but previous to that the same kind of stories tended to be about witches or demons and previous to that they were visits from the Gods and so on. These stories have always been around, from people who have experienced things they can't (or don't want to) explain.
Further, people love the dramatic, so when something momentous happens, like the death of a much loved public figure, they are disappointed if there is a mundane explanation for it, so will prefer to make up elaborate conspiracy theories to make the event more dramatic. We don't like to think that such people can be brought down as easily as anyone else can.
Ironically enough, governments like in the UK and US tend to be guilty of much more terrible things than most of the conspiracy theories tend to imagine and have entire branches of their secret services dedicated to preventing their populaces from finding out about them, yet they seem to get away with this most of the time without anyone suspecting them of anything.
This dual standard of the governments just encourages conspiracy theorists because when you are constantly lying to your public about horrible deeds that you have done, then it is no wonder that they think the worst of you in other matters and tend not to believe a word you tell them.