Being on the interviewed side of things currently I'm always amazed at how unprepared people are when they come to the interview. I've been there many times myself.
I think there are many reasons and the one the most comes to mind is interview numbness. You might be required to talk to so many people that they all blend together and putting any effort into preparation is just too much to ask. I've been there, when HR determines they need to interview 15 people for a position and you're the only one qualified or not as busy or standing in the wrong place at the wrong time and there goes your day -- or worse.
Of course not everyone is a good interviewer or even cares who gets hired. It's so much easier to walk into an interview (or the tenth interview), ask some canned questions (I call them ditch digger questions to see if the person is a programmer or a ditch digger) and maybe a puzzle, excuse yourself and hope HR just picks someone at random.
The process of interviewing people is supposed to reveal the ideal candidate that perfectly meets your needs. The reality is that the process is often messy, confusing, overwhelming and creates a loss of productivity in the interviewer. Some companies try to schedule interviews at certain times so that the interviewers aren't inconvenienced too much but everywhere I've worked that is rarely a consideration.
The end result means you might miss a great candidate and wind up with the random choice. The process itself might discourage people from even considering your company. I once interviewed at a large national company and the interview itself was so disorganized I couldn't wait to leave and swore to never work there. Another place I had 8 consecutive interviews with everyone on the team, one after another. I think all but 1 of them actually cared. One guy refused to attend even though he was nearby.
I've seen almost every kind of interview, from parallel interviews where you sit in the center of a dozen people firing questions at you, the serial interview where you meat with many individuals or groups one after another, the angry interview where all the questions are designed to piss you off, an interview where the two people took turns trying to scare me with how awful the company was, trivia contests and my favorite kind of interview where I get to make everyone laugh so easily that no actual questions are ever asked.
From an interviewee's perspective after enough of these variations you begin to understand how to take advantage of each one, assuming of course you do have ability and experience that the company is seeking. You can still fool some interviews but bluffing about experience when you can't talk the talk is pretty hard. I have seen people get hired I thought were unable to program at all simply because they fooled someone else. I have also fought for candidates that other's flunked because I was willing to work to see what was behind the fear or nervousness or they couldn't do A but excelled at B.
The key with many people who are interviewing you is to never lie about something you don't know. If it's something you've never done but have read about, say that. If you have done something similar in a different way, talk about that. Always point out projects or jobs in your resume that reflect whatever was being asked and provide some details even if they don't match exactly. People are looking for bright people who can solve problems and deal with new things, not robots who match a job description. Recruiters on the other hand only care for the robotic matches.
Being friendly and even funny is always good but only if the interviewers appear to have a sense of humor or are sociable; otherwise don't do it. Making people feel you are easy to work with and would make a good fit in the group is always a plus even if your actual experience is less of a match than someone who is better than you but would be painful to work with.
If you can tell that people have not read your resume, blog or know anything about you it's always useful to mention things in them as long as you don't rub it in. Often interviewers have the numbness that comes from too many interviews and didn't take any time to prepare, so mentioning things can make you stick out and sometimes they might feel bad they didn't know anything about you. As always you have to judge the personality of the people who are talking with. You never want to make people dislike you! You do want people to remember you positively even if you are one of 15.
As an interviewer your best bet is to read the resume ahead of time, check out the blog, linked-in page or whatever is offered. It makes interviewing so much easier as you can focus on asking questions from the resume instead of fumbling around with ditch digger questions. I've had people start out asking what are the main features of object oriented programming instead of starting out asking about the technologies and design of a complex system I clearly reference in my resume. Instead of asking me to write a linked list code on the whiteboard, how about a discussion on the relative benefits of linked lists versus arrays versus maps? Which will get you faster to determining the quality of the candidate? Which will get you out of the interview faster?
To me the best interviews have always been a chat between peers. If both sides can talk about complex subjects or projects or even the current direction of certain technologies as if they were colleagues at lunch that would make both sides more likely to want to work together. I've always said "good programmers talk like good programmers, ditch diggers don't". Anything that makes it easier to feel that good programmer talking vibe (or not) is going to make the process easier, more successful, and maybe even fun.
Bad interviews are also bad marketing for the company; I've passed on jobs because the interview was bad. I did take the job where the two guys took turns telling me how bad the company was because despite the horror the two were funny and clearly would be fun to work with; maybe we could even fix the company together (we didn't but they're still my friends today, that company is still screwed up).
Finding a job is similar to marriage; after a lot of dancing you want to wind up with something that will last and be fun.