This is part of the overall concept of the fediverse and the activitypub protocol.

Think of it this way - what is the difference between Twitter and Instagram? They're very similar. The one key difference being that Instagram requires you to include a picture. But you can include pictures in Twitter too. So wouldn't it be nice to be able to see Instagram accounts from your Twitter account? Speaking only of the technology and not the content or corporate shenanigans that is. (by the way, Pixelfed is an activitypub clone of Instagram, and it can interact with Mastodon)

What if you have an idea for a microblogging platform, but it's a little bit different from the vision that the developers of Mastodon have? You can try to submit code to Mastodon's code base but there's no guarantee they'll accept it. You can fork Mastodon, but then you have to work within the framework that they've laid.

Or you can create your own platform. The benefit is, you can implement the same set of interoperability standards that the community has agreed upon. You don't have to attract all the users to your service to the exclusion of other services.

So why is all of this a good thing? There are a few reasons. If Mastodon starts heading in a direction that users dislike, they aren't stuck with Mastodon. For example, if they started behaving like Twitter, users could just jump to a different platform, but they would be able to continue to interact with Mastodon users who choose to stay.

If someone has a much better idea for a platform and puts the time and effort in to make it truly great, there's no reason for users to be stuck on a now inferior platform.

And if one software package tries a cool new feature that Mastodon doesn't presently have, and that feature catches on, Mastodon and other services can choose to also implement the feature. It increases competition, but also increases potential for collaborative development.

The creator of Mastodon said that he isn't going to add an option to set post length limits. I briefly tried to change it and wasn't able to make it work.

Firefish is a fork of Misskey which predates Mastodon by 2 years. As for why one would fork Misskey into Firefish or make Mastodon, some of the rationale for that is explained in the Fork a repo page by GitHub.

You can ask the developer of Mastodon personally why he didn't just make Misskey better, or the lead developer of Firefish why they didn't just contribute to Misskey or Mastodon, but fundamentally the platforms are very different even if they're inter-operable, and this comes down to the actual design of the platforms.