Canon's lineup is as clear as mud to a newcomer, and I believe it's because they've been working to broaden their product lineup over the years.
In days gone by, they had an entry-level Rebel camera (300D, 350D, etc.), a pro-sumer camera (10D, 20D, etc.), and a pro camera (1D). The 5D was sort of a new "slot" between their pro pro-sumer cameras that effectively split the pro-sumer segment into crop-sensor and full-frame segments.
They've now done the same type of thing with the Rebels up through the 7D. As the Rebel started to move upscale (450D, 500D, etc.), they had an entry-level "hole" in their product line -- hence, the 1000D / Rebel XS. At the same time, the 7D came out as the crop-sensor flagship, but it's kind of sitting right where a lot of people expected the 60D to be, prior to its introduction. In other words, if you kept improving the x0D line, the 60D should have turned out a lot like the 7D. Instead, Canon tried to split the difference between the 550D and the 7D with the 60D and then upgraded the 550D to the 600D.
Confused yet? 'Cause I think a lot of people are. That's a really large number of concurrent products, and there are spots in the lineup where there's not a huge jump from one to the next. The only sense I can make of it is that they sort of push the low end of the line to mass retailers, so the full product line is usually only seen in camera shops where (hopefully) there's someone there to explain the differences.
Personally, I agree that they've got one or two more cameras in their lineup than they really need, but I'm sure they've got rooms full of marketing MBA's working on this all the time, so I'll trust they've given it lots of thought.