datahub.io is powered by CKAN, and as far as I can tell, seems like a watered down flavor, perhaps for a certain user base. The about page isn't very helpful..does anyone know the exact differences between them? And/or the reason(s) for using (or not using) each?
As you say, http://datahub.io is a particular instance powered by CKAN, so you can't really compare both. In terms of what is particular about datahub.io, it is a community centred and powered site where everybody should be able to host their data, rather than the more default scenario of one or more organizations publishing data on the portal.
It is in the middle of a migration process to a newer CKAN version, so I suggest checking the blog or contacting the maintainers if you want to know more about its status.
To add to amercader's answer, if you have some data to publish and are wondering whether to use datahub.io or your own CKAN instance, there are various considerations.
Using datahub.io is free and requires no setup, site hosting, etc.
With your own instance, you can have a data portal 'homed' at your own web address (e.g. data.myorganisation.org). You can choose the site configuration and which standard extensions are installed, have admin access to the site, and add your own pages to the site (e.g. a Contact page, pages about the site or project, etc). You can theme the site to fit your website branding, change the default metadata schema, add extensions, etc.
In short, if you only have a few datasets to publish, datahub.io is a good lightweight solution. For a larger-scale or more bespoke data catalogue, it is probably worth looking at getting your own CKAN site. Datahub.io is not 'watered down', but it is shared with other users and of course you cannot choose different site configuration options etc.