They sold them "into the retail channel", which I think means retailers bought them. Microsoft probably tried to liquidate the rest of their Xbox 360 stock in light of the Xbox One, which could explain the large number.
Xbox 360 is supposed to continue alongside the Xbox One. It sold well in the US in the holiday season, according to NPD, and I'd assume it still appeals in many parts of the world where the Xbox One is just too expensive.
Lack of compatibility is an obvious drawback but consoles usually are incompatible.
