I think there is an element of security that appeals to people using dating sites - hiding behind a keyboard if you will. For me its not so much hiding, but the fact that I can get a feel for what people are like by looking at pics, profiles and forum posts, before actually striking up a conversation. It avoids awkward silences and the likes. I could imagine speed dating in the real world being quite awkward at times as you are 'forced' to converse with someone who you have never met before.
I also think that a good relationship can be built up online using text-based messages, particularly instant message converstions. It is possible to get to know someone really well, providing that people are honest with each other. I think honesty is the key, because if you plan to meet someone in the real world you need to be the same person as you were online.
Regarding profile pictures: I think they provide an initial idea of what a person is like, but ultimately if they can't hold a decent conversation then there's no point pursuing a relationship.

Finally someone got where i was coming from with the sarcasm!!!

Too much pessimism!!!

Negativity isn't very attractive (I understand that that was quite the negative statement and I promise not to repeat it haha).