Guileless: Speculators happened, that's what.
People were looking for creative, "safer" ways to invest their money in the early 1990s, and some idiots got it in their heads that comic books were a smart investment, because some financial gurus told them this was true. After all, rare classics like Action Comics #1 are worth tens of thousands of dollars, right? Yeah, well... So, the industry experienced a massive influx of new collectors, and sales soared to all-time highs. When DC, Marvel, and the other comics companies realized what they had on their hands, they (naturally) decided to cash in by offering more special "collector's" issues. Variant covers, foil covers, new #1 issues, milestone issues, shocking "Death" issues etc etc. And collectors snatched them up, hoping to bankroll their retirements or send their kids off to college with their "rare" comics. In the process they made the comics companies and creators very rich, very greedy, very spendthrift, and - unfortuntately - creatively bankrupt.
The problem was, those rare comics from the 30s/40s/50s/60s are worth so damn much because THEY'RE RARE. And these new comics of the 90s simply weren't. Publishers were printing millions of copies of their comics each month to rake in the money, and that would've been okay if there were millions of customers buying them... but there weren't. What you had was a small core audience of fans, and then a sh*tload of speculators buying dozens of copies of single issues hoping to strike it rich. A comic with a monthly print run of 500k+ copies might only have 100k fans reading it, with the remaining 400k being bought up by speculators. And when the speculators figured out their comics weren't going to be worth spit, they quit buying, and the bubble burst.
The retailers (the only folks not getting rich off this) were left with hundreds, even thousands of unsold comics on their racks, a greatly diminished or nonexistent customer base, and bills they couldn't afford to pay. Stores across the country shut down for good, speculators just weren't interested anymore, the youth of America were moving on to other sources of entertainment like video games, and the fans... the fans were either left out in the cold when their LCS closed, or quit buying because the comics were all flash and no substance. And without retailers to sell their comics through, the comics companies were in deep, deep trouble.
I think DC fared better than Marvel after the bubble burst, because of their connection to Warner Bros. Even then, they barely got by, and IIRC there was talk of WB doing away with the whole operation. Marvel was in serious trouble for a looooong time, hence their bankruptcy filing and reorganization a few years ago. Image got broken up pretty good after the crash, with only the stronger titles and studios surviving. A lot of smaller independent publishers got hurt and went under too.
Today, the industry outlook is... cautiously optimistic, I'd say. The industry's top-selling comics average only 100-150k copies per month, with a vast majority selling far below that. And as many of you can probably attest, there aren't a whole lot of LCSs left out there. Sales of graphic novels on the other hand, are definitely on the rise, thanks in large part to their availability through mass-market retailers. Merchandising also plays a bigger part these days, in specialty markets and direct sales. And manga is definitely making waves, drawing out young readers in ways that American comics can't; Marvel and DC have both been looking to get a piece of that market for a few years now... with only a small degree of success.
DC and Marvel are both doing fairly well while still recovering, though not because of their comics; it's because of their efforts in other entertainment mediums, namely TV and movies, that they're prospering today. How long that'll last is anyone's guess, though, and I wouldn't bet my company's entire future on the tastes of fickle moviegoers. Image looks nothing like the company it started as in the early 90s, but is more true to its original spirit as a haven for innovative, creator-owned originals. Dark Horse has a strong stable of licensed properties like Star Wars, a number of ground-breaking works like Hellboy and Sin City, and high-profile manga titles that sell strongly. And independent publishers tend to do well by not getting overinflated, and by knowing just how big their audiences are and exactly what they want.