Some jobs pay a living wage, like yours.
Some don't, like service positions. People in those positions rely on tips to supplement their salary. It's a weird way for things to work but that's how it currently is in most of America.
This is the most succinct explanation. And it is very weird. I have an economics degree and tipping is widely studied.
For reasons both substantive and arcane, the economy has developed in a way that for certain classes of jobs, the employer essentially does not pay its employees the full fair value of the work, with the customer making up the difference through tips. This allows the employer to charge its customers less for the service it provides. However, the make-up payment from the customer to the employee winds up being spread unevenly because customers tip in unequal amounts. To some extent, this is based on quality of service, and, therefore, one might conclude it is efficient for the economy -- those who provide better service receive higher pay. However, it isn't directly correlated. Because so much of the job performance is not visible to the customer, those aspects that are visible have an outsized effect on compensation. In addition, another significant component of the variability in tips is simply the habits of the customers. This is inefficient in terms of the labor consequences, as differences in income relate to luck rather than the amount or quality of work. For customers there is some efficiency created, as those that can afford to pay more may do so. However, it is inefficient in that a good part of the difference is simply habits -- some people refuse to, or simply are not the habit of, tipping for certain things, like housekeeping, unless the service is noticeably outstanding. Others tip as long as the service is as expected.
Whether you like tipping or not as a system really depends on whether you believe the incentive for quality work that tipping builds into the system (which would otherwise only come out in terms of raises or terminations) provides sufficient benefit to offset the inefficiency brought about in the labor force and inequality in terms of what people pay for the same service.
Those who take the approach of "I only tip for excellent service" are contributing to both the efficiency (better service leads to higher pay) and inefficiency (same service leads to different pay simply depending upon the luck of the customer), when their approach is compared to the approach of "I tip because it is the way certain workers make their fair wage".
