Voxels were used precisely because of a lack of memory - it provided a way to simulate irregular terrain without using a lot of memory. The problem is, the fewer voxels you use, the worse the terrain looks. Once you achieve enough voxels to provide a fairly high quality terrain simulation by today's standards, other methods prove more efficient. The reason of course lies in the very nature of the voxel. As one might surmise, a voxel is simply a "volumated pixel". Mathematically, this is represented by a matrix of numbers with each cell in the matrix acting as a single pixel. In most incarnations, you have two disctinct values - one represents the height of the pixel (the whole volume part) and the other represents the color of the pixel. With enough voxels, complex terrain can be accurately simulated. If you want additional fancy graphical features, these would also require an entry in the cell. When you consider that a single pixel could contain many bytes of information and realize that matching other high quality mechanisms of terrain simulation could require thousands of entries to simulate a scant few square meters you begin to see the problem.
Even on a modern computer, memory is still a sparse commodity, and worse still voxels by their very nature are often calculated on the CPU (it is a simple matrix operation). There are advantages to voxel terrain however. For example, if one wanted a game that could simulate the effects of weapons on terrain accurately, the voxel system would provide an excellent mechanism. Of course, accuracy is not nearly as important as efficiency is, especially when one could expect there to hundreds of such incidents happening in the space of a minute in some multiplayer games.
The voxel is really only useful in two scenarios. One, where one wants to simulate irregular terrain in a situation where the terrain will never be closely examined (an RTS for example) or in an instance where other modern options arent available (because of budget constaints for example - it takes a lot of artists to make terrain in the modern fashion, whereas a voxel terrain can be done in a paint program relatively quickly. In fact, Ground Control used a system similar to voxel for it's terrain). Perhaps the most famous examples of the voxel are found in Delta Force 1 and 2, and at the time they had cutting edge technology. In an era where most FPS were confined to corridors and other enclosed spaces, the incredibly terrible (even at the time) graphics representing the ground were more or less irrelevent as the game had little direct competition.