The spiked chain, if you will pardon the pun, is a very flexible weapon. It gets a bonus on disarm checks and can be used to trip, so it's a good weapon to use in a combat where you want to feature these special maneuvres instead of vanilla attacks. As a two-handed weapon, it gets 2-for-1 Power Attack, so it has good damage potential against low-AC opponents. In all the above aspects, it is no different from the heavy flail.
In addition, it is a reach weapon, which makes it an attractive option for high-Dexterity characters with Combat Reflexes and Spring Attack. The fact that it is also finessable (the only finessable reach weapon in the PH) is a further point in its favor.
Its other unique characteristic, the fact that it is a reach weapon that also threatens adjacent opponents, seems to bother a lot of people, although I personally haven't found it to be a particularly potent ability. It does work well with Whirlwind Attack, though.
The real disadvantage to the spiked chain is that to use it at its full effectiveness, you need a character with decent Strength, Dexterity and Intelligence with Exotic Weapon Proficiency, Combat Reflexes, Power Attack, Dodge, Mobility, Spring Attack, Combat Expertise, Improved Trip, Improved Disarm and Whirlwind Attack, even before optional add-ons like Weapon Finesse, Weapon Focus and Improved Critical. Not every character can manage that. Frankly, if you only have the ability scores and feats to pursue one or two of the paths (Improved Disarm/Improved Trip, reach + Spring Attack, Power Attack) you can probably find a weapon that works just as well and doesn't require you to spend a feat.
Of course, if you think that flexibility is the most powerful thing in the game, you would probably ban the spiked chain along with the mystic theurge.
Concerns about historical accuracy are also valid, but seem more suited to a game of d20 Past than d20 Fantasy.
If you just don't like the weapon, you are welcome to your opinion, but please don't confuse taste with quality.
I happen to like it and I think it's fine. In the campaign I'm running, the PCs encounter spiked chains fairly often because their main opponents are the shadar-kai (shadow fey), whose signature weapon is the spiked chain. The flexibility works for me because I can use the same weapon and still have it reasonably effective in the hands of Power Attacking brutes, intelligent trippers and disarmers, as well as dexterous Spring Attacking skirmishers, and the occasional all-round weapon master who is proficient every way that it can be used.