They probably want basic encryption to hide their textures from people or like Valve who have the vtm and vtf files they can then add custom meta/associated data with each texture file like bump amount or mip levels.
(Although the meta in this case is store in a separate file, so I guess they could indeed use plain ol' dds)

companies use custom format because they write their own file loading modules that they use in their engines.

The real main reason is that they don't want the user's of the games to fiddle around with their data. They make custom format which their own engine can read only, not by something like photoshop & MSpaint. This way they make sure that their data is safe.

The same question can be asked why people don't all use BMP's or TGA's for textures.

There are a variety of reasons. Often times there is the desire to package certain metadata with a textures, or package strange types of channels [such as embedding a bump map into a texture, instead of just straight ARGB], or perhaps they want special characteristics with respect to how textures are loaded such as usable partially-loaded textures for a game that features a lot of streaming.

Plenty of reasons.

*edit*

Oh, and data isn't safe, and game companies understand this. Simply compressing all the data in it's original form into a archive is typically the extent to which companies go to protect their assets, and even then it is largely for performance reasons. If data obfuscation was the goal, we would see a whole lot more games that encrypted the hell out of everything, which we just don't see. Even then it's just a matter of how much effort the attacker needs to put into getting to the material, since you can't use it encrypted. They just need to wait until the part of the program that puts things in a more simplistic form, and rip it then.

A game I recently made used sounds from a royalty-free sound library, but the license also said that I had to stop others from just copying those sounds for themselves. Since I like to use .zip files for my pack files, the only solution is to fiddle with the file format itself. Apply to this to a large project with assets from many different places, and it makes sense to just protect all the files securely like this.

I'll answer your question with another question: what the hell is DDS!?
(Yes, I can guess, but I really don't know what it is - besides being an image format, which is why I personally don't use it. I usually use PNG (if I need transparency) or whatever is convenient at the time. There are many formats to choose from, so I guess people choose one that suits their needs - or the create their own format which suits their needs).