People like karaoke because of the emotional larping: heartbreak, confidence, cuteness, coolness, etc. You get to be a performer for a few minutes, or even slip into the identity of the song’s actual singer. Lip-syncing gives the same experience.
Not only that, it lets you show off your face without admiting that’s what you’re doing. “Look at me singing” instead of “look at my face”. It’s like taking a selfie with extra steps, and the extra steps offer viewers more stuff to appreciate: different angles of the face, expressions, movements.
Lip syncing is more accessible. You don’t need to be very attractive to get decent engagement. You definitely don’t need a good singing voice as well.
And because of not needing a voice, you can larp even deeper than you ever could at karaoke. Now you and others don’t have to hear the thing that may taint the whole experience.