Its the same reason a lot of games go with World War II as a setting. Familiarity. People tend to generally know what Elves, Dwarves and Trolls are. There's enough wiggle room to put a semi-unique spin on those, but it's not like in Sci-fi where someone names their race the Qzz'Urthans, and they look like nothing at all recognizable. People have a hard time relating to them, and at the very least the game is going to have to spend time explaining what they are, and why the player should care about them. Of course the other option sci-fi has, is to go with easily recognizable trope aliens, like Space Bugs, or Space Lobsters or humanoid cat people, etc.
Also, going with the fake fantasy races, one can avoid the trap of accidentally being racist to an actual group of people. Imagine we replaced elves and dwarves with, well, actual ethnic groups. If we replaced dwarves with german people, and then said, "yeah, they're all short, squat, with big noses and hate trees and love to mine gold..." You can kind of see how that wouldn't go over well. Though that does tend to highlight just how much fantasy games tend to overdo racial stereotypes. It also lets people explore some darker aspects of human nature, with worlds where most elves are slaves (DragonAge), or most orcs are slaves(EarthDawn) without having to worry about how they might misrepresent an actual group of people.