The peep is WHERE it is to allow an archer to see his or her pins through the string. It is where it is b/c that is how your eye lines up in reference to your sight pins once you are already anchored...

Before they had peeps, I shot around my string using the same references that I do today.

The reason a peep is not a good anchor point is b/c they are too big and allow too much room for error, if you were to use a really small peep (which a lot of archers do in the competition side of it) then it would become a better anchor reference but then you would not be able to see your game except in perfect lighting situations....