I think it's because mind flayers are alien and as noted vaguely Cthulhu-like. That lends to their mystery and mystique.
Of course, too much of a good thing gets old fast. I think the ideal mind flayer encounter where the mind flayer is behind the scenes, manipulating monsters and key figures. The last possible moment, a strange tentacle monster comes out of the shadows and tries to SUCK YOUR BRAIN. AAAAAAAAARGGGGGGGGH.
Of course, too much of a good thing gets old fast. I think the ideal mind flayer encounter where the mind flayer is behind the scenes, manipulating monsters and key figures. The last possible moment, a strange tentacle monster comes out of the shadows and tries to SUCK YOUR BRAIN. AAAAAAAAARGGGGGGGGH.