Why do casinos have such ugly carpets? David G. Schwartz of The Die is Cast blog and avid collector of casino carpet photos (amazing gallery here, blogged previously on Neatorama here) said that "Casino carpet is known as an exercise in deliberate bad taste that somehow encourages people to gamble."
Alex Boese of The Museum of Hoaxes has other explanations, including:
Colorful carpets better hide the stains (blood, vomit, etc.)
The intricate patterns are designed to conceal chips that gamblers accidentally drop. The High On Poker blog writes, "Rumor has it, casinos make lots of money with a machine not traditionally on the casino floor: the vacuum. The rumor goes that every night/morning during clean-up the vacuums pick up all sorts of chips that have fallen on the casino floor. The kaleidescope vomit [pattern] with its reds ($5 chips) and greens ($25 chips) would serve as a perfect way to fool patrons into losing their dropped chips."
I'd like to offer an alternative explanation: have you seen the decor of casinos? Obviously the garish carpet is to distract you from the ugly room!