The .30 Army was the first smokeless powder round adopted by the U.S. military, but its civilian name retained the "caliber-charge" designation of earlier black powder cartridges. Thus the .30-40 Krag employs a .30 caliber (7.62 mm) bullet propelled by 40 grains (3 g) of smokeless powder. As with the .30-30 Winchester, it is the use of black powder nomenclature that leads to the incorrect assumption that the .30-40 Krag was once a black powder cartridge.

The 30/40 Krag Jorgensen rifle was the only rifle adopted by the US Military that was only used for 9 years and then discontinued. The fact that most service rifles had 13 or less years of use only helped to spawn a interest in the guns long after production was discontinued and the guns were sold to the public at a very reduced rate. 500,000 of them were produced in this short period of time and they were used to fight battles in such places as Northern China, Cuba and the Philippines.

One other fact was that as powder technology improved - the need for a larger case and rimless design was very important for the military - since there was constant skirmishes and wars going on around the world and the fact that the next big war was imminent.
The German Mausers held a unfair advantage over the underpowered Krag rifles.

The one thing to remember was that these rifles were designed to be used as a fighting tool and not just a firearm. They were big, long, encompassed in wood and did not hold much ammo - 5 rounds compared to 10 rounds of some other military guns of its time.
It was easier to load and did not require a clip and did not require the user to open the bolt to reload. It had a limiter ( magazine cut off) which would allow you to use it in single shot mode - a feature that was carried over to the Springfield rifle and one that is still incorporated into some semi automatic rifles and shotguns even today...

http://en.wikipedia.org/wiki/Krag-J%C3%B8rgensen