There are tons of blog giveaways you can enter and all of them have basically the same reason. Get more traffic to the site. Get more exposure. Let people know you exist. With a giveaway you basically give people a chance to get something for free and in exchange they do things like: follow your blog, twitter, like you facebook page and so on and so forth. Some of those who did follow to enter the giveaway will stop following as soon as it's over, but as long as your content is interesting enough for people to read, most will remain to see more and more of your posts. Giveaway is a good way to celebrate something. Me, I'm celebrating my new youtube channel with a $50 giveaway.
What can you giveaway? If you are an artist, you can giveaway something you have made. Otherwise, you can find sponsors who would like to get some exposure (you need good following already for people to agree to sponsor). You can giveaway something you bought, something you no longer need or something you won yourself. There are thousands of giveaway going on every day, so you can easily win some goodies for your own giveaway.
The rules of the giveaway should be easy to follow. It should be easy to enter. People are not likely to jump through hoops to enter a giveaway when there are many more out there. The gift has to actually be worth something. The higher the value, the more people would enter, the more exposure you will get. The best one I have seen was a $550 value. It was a huge amount of gifts combined into one.
Just because you posted a giveaway however doesn't mean people will start flocking in, you have to let the world know it's there. Luckily there are hundreds of websites and blogs where you can post a link to your giveaway so that people can find it there.
Oh, yes, and you can also win tons of gifts for yourself and enjoy all the goodies. They are always good to get.