A good article on the matter from the BBC (a less biased souce than me!):
IE became dominant because they used their monopoly in the OS market to destroy competition. This fact was established during the case by the US government, during which Microsoft was found guilty. MS got away virtually scot-free then, and it has happened again now. There are loads of better browsers out there, Mozilla, Opera to name two, but they are hindered by the fact that IE comes preinstalled in Windows, and that Windows comes preinstalled on their PC.
And who elected Microsoft? They bought their dominance. The W3C is a consortium of members, including Microsoft, IBM, Sun, and interested parties from across the technology, industrial and educational fields. It may not be perfect, but it doesn't claim to lay down the laws, and it works to keep the internet open to all. A hell of a lot better that one company working to make the web into its private fiefdom.