This statement is simply not true. Boss fights and challenges have been rewarding player accomplishments with items for a very, very long time. The idea's been in Baldur's Gate, Ultima, Wizardry, Final Fantasy, game series that predated MMOs. And it's been in tabeltops before there were video games. Kill the dragon, get its horde. It's an idea as old as gaming. It's an idea as old as capitalism. Hell, it's an idea as old as *fairness*. People want something to show for their effort.
Getting a reward, yes, but it is the drama of tit/tat risk/reward that is an MMO staple. There is no standard for such in gaming in general to the level that MMOs antagonize over.
This would be a little more valid if A) This, as state before, isn't a concept inherent to MMOs, and B) Good equipment load out wasn't an integral part of the game. Equipment is necessary for a balanced and capable party, which means without a good loot system this game's mechanics aren't as solid as they could be.
It is a common aspect of MMOs, a design focus and goal and a much lamented aspect of their design. You can argue some games and people attended to such, but it wasn't a standard, a staple of design as it is today. Loot-centric gaming is specific to that timeline of games.
You don't seem to understand what a "participation trophy" is. A participation trophy is something you give players something for showing up and taking part. That would be the equivalent of giving the player loot or experience for loading up the game.
Look at the arguments. They want loot to be tailored to their character, always useful to their makeup. They think because they showed up, they deserve a prize. Yes, expecting to be rewarded for every encounter, for every step of play, as you think you deserve is... that mentality. The reward for applying effort to beat an encounter is not a reward, they want something shiny, because shiny is their focus, they have to have their trophy for just being or it isn't worth the effort to them. It is that mentality, that focus, that goal which has resulted in games that are all flashy gimmicks with lots of rewards, little challenge, little effort required.
No one's arguing for that. What we want are rewards for actually, y'know, succeeding. Beating the boss, finding the secret, investing time and energy and thought into a task and being compensated for their efforts. And why shouldn't the winning team get trophies? Why shouldn't someone get paid for putting in a hard day's work. A hard day's work is its own reward? I'm sorry, but that's asinine elitism. You can keep that brand of masochism for yourself, because you will find very few supporters here or in the real world. Every good game offers rewards to its players. In early platformers it's a simple "congratulations" and a small ending sequence. In RPGs with loot systems, there's loot.
As I said, the concept of "A hard days work is its own reward." is an alien concept. The reward is the game play, the effort, the failure and eventual success. It is the "all about loot" focus of this generation which has led to the decline of games as they sacrifice game play for cheap shiny trinkets. Loot focused play and design is a staple of MMO games, one of the most popular genres in the past decade. It isn't a surprise its design goals are favored by mainstream.
Edit:
Note I am not arguing that loot should not exist. I am making the point that loot is not the main focus, that the arguments here that loot should be balanced for everyone in the party and for every event of an equal proportion, etc...
That misses the entire point of RPG gaming.