It comes from the times of clasful IP and 127.0.0.0 is an class-A network and therefore a /8 mask is assigned.
To answer the second part: Yes I've seen setups where more than 127.0.0.1 was used, e.g. for running multiple SMTP content filters on one host or multiple instances of a database server.
Note that for IPv6 you only have one loopback address ::1