To be fair the "shortcomings" that spurred it on mainly were the Samba guys (or just one) reverse-engineering Bitkeeper causing the kernel free license getting pulled, which caused Linus to say "I can build my own with blackjack and pre-commit hooks" and then he did, addressing it toward his exact use case.
It gained tons of popularity mainly because of Linus being behind it; similar projects already existed when it was released.
When I tried both at that time hg was just really slow so I just adopted git for all my personal projects because it was fast and a lot better than cvs. I imagine others were the same.
Mercurial and Git started around the same time. Linus worried BitMover could threaten Mercurial developers because Mercurial and BitKeeper were more similar.
It gained tons of popularity mainly because of Linus being behind it; similar projects already existed when it was released.