I do think people know they are out there but I think the impression is that they are more exotic, expensive, hard to setup, and lower quality.
Projectors definitely are exotic and to many the only time they see or read anything about them is in the various Home Theater magazines, which I personally feel are sometimes a bit out of touch with the average consumer. I say that because when they do feature an HT setup, it is usually some celebrity or a high profile installation that exceeds what a person is ready to shell out.
Everyone I talk to has the impression that having a projector means a $50K project of building a dedicated room done by professional installers. So that definitely lends to the exotic perception.
What most don't see or read about is how more and more people are using projectors in multi-purpose rooms that aren't specially designed dedicated 'theaters'.
Then there is the issue that they aren't nearly as easy to setup as an HDTV. I know of no one that comes home with a new projector and are watching it that night. No matter what the room setting, be it a dedicated HT room or a multi purpose room, a projector setup takes more planning than just buying a TV.
Next is cost. Again thanks to a lot of the print magazines people tend to only see and read about projectors that are either a brand new release or some top of the line (meaning expensive) unit. They may not be projector experts, but they do know that a screen is also required as well as mounts, cables, and time. Most people I know think it's more hassle than it's worth.
Image quality and screens- A big perception is that a projector just can't have a good image, at least nowhere near that of a stand alone HDTV. Depending on how things are setup; the screen, and the viewing conditions, that can be a very true statement. The biggest problem is that projectors do not handle daylight very well at all. They can be very surprising with even high levels of man made room lighting, but when it comes to mother nature and sunlight... well the typical setup doesn't usually live up to expectations.
Part of this has to do with screens. Actually a good percentage of everything mentioned has to do with the screen. You can have one of the best quality and most expensive projectors made but in the wrong environment and with the wrong screen it will look bad. Not might, it will.
Screens are a whole other arena that has its own set of problems and stigma. Is a plain jane unity gain matte white screen that costs almost $2grand really better than a $500 matte white unity gain screen? The short answer is no. But it really isn't that easy. We have fixed frame screens, retractable screens, motorized screens, tab-tensioned screens... the list is almost endless. Some people simply do not want a fixed frame screen and others can't accommodate one, or in a multi-purpose room it could be a wife approval thing where she wants it out of sight when not in use. Retractable screens are relatively inexpensive, even for a good quality screen material and even an electric remote controlled one. The problem is most aren't tab-tensioned and they eventually will develop waves in the screen, which will ruin the viewing experience.
Some people turn to DIY, but even that has a stigma. At first glance DIY can often look like a bunch of nuts, and a total lack of standards throughout the online community makes it almost impossible to really get a good comfort level whether they actually work. They do, but again we come full circle to the comment that it all depends on the setting and how well everything is matched up.
I have written about this before and in reality most people are working backwards. It's not really their fault though. By backwards, let me explain- Typically a person sees a projector at a friend's house or in a store with a proper viewing room and they are blown away by the size. Big boys like big toys! Anyway, they look at the price and think 'Hmmm, that's not as much as I thought'. Some models are even a lot less than an HDTV, so visions and dreams start filling their head and they pull out the card and buy the projector. Granted that's not how everyone does it, the main point is at some time or another a person catches the projector fever but not knowing much about them, they usually buy the projector first and then think about the screen.
That is where everything is backwards. I see a lot of people blow their entire budget on a projector without ever even thinking about a screen. Then they start to see that some screens can cost as much or more than what they spent on the projector. Worse, they may have purchased a lower lumen projector suited for a dedicated room and expect it to look good in a family room that has absolutely no light control. When this happens they usually aren't very satisfied with the experience and that's what all their friends hear. Then the perception and stigma grows and a lot of people flat out think projectors mean big image, but poor quality.
The very first thing a person needs to do is sit down and seriously evaluate what it is they want and expect. Part of this step is being totally honest about viewing habits. Will it be used during the day? At night with some, or even a fair amount of lighting on? What are the room dimensions? What is the color of the walls and ceiling and will that create a problem? Once it is determined what the range of viewing settings will be like then a screen type can be thought about. Basically that boils down to two types, gray screens or white screens. Those with lighting issues or that want to have some lights on will need at least a light gray screen. Those that want to watch during the day and can't stop all the sunlight from coming in will need a different type of screen as compared to the person that either has a dedicated setup or only watches movies at night with total light control.
From there, a person can then start looking at projectors and find one that will work well with not only the screen but also the room setting and their viewing preferences. Hence the reason I say things are usually done backwards... typically the projector comes first and the screen is an after thought.
Then we have to mount everything and figure out how to run the cables! Most people have no idea what all is involved with a projector, but they know it is a lot more work than taking something out of a box, plugging it in and firing it up. So with that I don't think projectors are a secret as much as I think they are viewed more like an exotic sports car. Most guys would love to have one, but think they are either too much work, or cost way too much. Well... what if I told everyone here that you can buy a Porsche that gets 32-34MPG and only spend around $4k? I'm dead serious about that, or buy a BMW for $2500... No gimmicks at all and I'm not being funny here. My point is if a person educates themselves first and then learns where to look and what to look for, projectors are not some exotic thing out of the grasp of us mere mortals.