Boxing in real life is not like boxing in movies. No fighter can go 12 rounds just throwing hands all the time. The clinch is used often for strategic purposes, to stop the momentum or interrupt the rhythm of the other fighter. It also is used to get some kind of rest when one is getting pummelled and can't find a way out.

Sometimes it's abused of course. But it is very much a part of the sport.

Daddy issues

It's wholesome and gives the sport a balance. Only psychopaths would watch people beat each other without occasionally embracing in a warm loving hug.

I believe most viewers think hugging makes the sport a bit boring to watch.

It's a sport before entertainment.

You're trying to break your opponent's bones, crush his organs, spray his blood across the front three rows of the audience. Not hurt him emotionally.

Disclaimer: boxing is actually a skilled sport and healthy competition, brain scarring issues aside.

It resets the position. Otherwise one guy would get pummeled and have no way to disengage.

probably lets the fighters regain energy and keep going.

otherwise they'd tire themselves out pretty quickly.

They are lonely.

Holding. It's called holding...

In Muay Thai, when your opponent tries to throw a knee, they hold the back of your neck and pull you.
A knee to the stomach or plexus is really powerful, so you have to act fast.
The best defense in those cases is to hold the back of their neck in return, pull them closer so that they cannot strike, and try to throw a knee first.
It ends up with a play of the two opponents holding each other and trying to throw a knee while closing the distance.
And most likely ends up in the dead lock or "hugging" that we see in match.

I'm sure there are other techniques that involve this holding in MMA. Forbidding it would remove those techniques from the game.

It's called the clinch and is a huge part of the sport. There can be a lot happening in the clinch that casual observers won't necessarily see or appreciate. Some of the all-time greats were masters at working the clinch.

If you are talking about western boxing which I assume you are (No kicks or anything but punches). The human body simply can not go at full pace for 12 rounds like that. If you want to watch some entertainment, fast pace, less hugging check out boxing in the Olympics. They are some mad lads

Hugging in boxing is why MMA/UFC took off.

I know the referees pull them out of the hug but it's just not good when the fighters finally got close enough to go blow for blow then they hug and all the action dies down.