Yeah, they only became big as ETFs the past say 10 years. Before then they were done as managed funds, but then expanded the same product to the stock exchange to offer that to those who invested in shares.
Managed funds are still around, but as they became popular on the stock exchange, other new ETFs sprung up there. There isn't really any difference between the two, except you can trade ETFs like shares, whereas managed funds are direct, individual investments. Some managed funds are still not on the stockmarket as ETFs and conversely there are ETFs that only list on the sharemarket and are not available directly.
As for investing individually, it's just a convenience and cost thing. You avoid the cost of all the individual trades, plus the convenience of not rebalancing and managing all that yourself, if that's what you want.