Right now, there are millions of blogs out there on the World Wide Web, but there are not necessarily millions of readers for every single blog. That means there is a chance of getting lost in digital space. If you just want to write a blog for yourself, then this may not be that big of a deal for you. However, one of the cool points of writing a blog is the idea that you are starting a conversation for others in the blogosphere to join in. Thus, most bloggers want to be seen and virtually heard.
One way to become popular is to fill a void. Just like with any business, if you can fill a need you can usually make some money. Therefore, if you can fill a content void, then you can usually attract readers.
While this may be easier said than done, the idea of niche blogging is to find a rather narrow topic that you have some knowledge, interest, or expertise in, and which is not much (if at all) covered by other bloggers. For example, a political blog would not be a good niche because there are zillions of them on the net. If you are a famous politician, you might get some attention, but otherwise, you will be just one of (too) many bloggers covering a topic that is pretty much done to death.
On the other hand, if you are a gardener and have a keen interest in creating Zen rock gardens, then that would be a much narrower topic. Check a blog search engine to see how many Zen rock garden blogs you can find. Read through some of the hits that show up when you search, and ask yourself if you see a need for this topic. Is there an audience? Is there enough information out there already?
See these articles/blog posts for more on niche blogging: