Beyond the fact that it's cheap, one of the other reasons Guatemala is so popular with students is because the locals speak significantly slower than those in other Latin American countries. If you've ever learned a foreign language, you can understand how important this is in the early stages.
The programs are actually a form of tourism for Guatemala, and a sustainable one at that. Local families hosting and working with individual travelers are about as authentic as you can get. The country has dedicated an entire site to the evaluation of its schools, Guatemala365.com, where potential students can read reviews and find a program/family that suits their particular needs and wants.
A little research and a glimpse at some of the photos of the programs shows that the experience goes well beyond the classroom setting. Students are in school for half the day, but when it comes time to practice, the destination is your playground. When you factor in all you're getting, including the chance to travel in your free time, the price seems very right for those looking to kill two birds with one stone.