This is a big KEY thing right here man. People follow the leader, naturally, even if they don't intend to do so. By putting yourself in your avatar you are setting the example and have opened up yourself to your users on some "hey I'm not just some mysterious admin guy, I'm also a human, and I'm one of you, and I'm not afraid or too shy to show my face and say whats up, you should too" That's what MySpace Tom did. That's what Kier did and I think that's what we as Admins should do. Kudos to those admins who are not afraid to show their own face on their forum. I have much respect for that. I've noticed that sites whose admins do not have themselves in their avatar usually seem to have "Mickey Mouse collections" instead.I can recall seeing far more people using their actual photo when I first started posting here, though that was probably because KAM did, and the early adopters followed suit. As more people have joined, so has your usual run-of-the-mill avatars.
I don't think it has much to do with privacy. Facebook & Co. have shown that privacy online isn't a primary concern for most. Rather, as someone else mentioned, it probably has more to do with people wanting to take on an alter ago when posting to forums. That's much easier to do if people don't know who you are.
That, and some people just don't like the way they look, for whatever reason. Then you have those who are just flat out not photogenic and know it.