Because it was too real. Sadly, It was aired during the era of mindless teen shows.....the 90's.
NBC executives wanted a show:

*With a typical story line (like Saved By The Bell, Dawson's creek, etc.).

*Where they could have sponsors (They couldn't add that many because it was set in the year 1980, when the products/company didn't exist).

*with (unrealistic) happy endings.

Because of this, they moved the show to Saturday nights (aka: the death row slot) which is when most of its audience were out to enjoy the weekend. NBC canceled it after Chokin' & Tokin' (which is also a big hint as to why it was canceled) and weren't even gonna show the last three episodes. Luckily, The show had a large fans base who demanded NBC at least give them an ending to the show.

Everyone is bummed about the executives decision. Even Judd Apatow (Producer and Co-Writer) said he started to cry when he heard the show was canceled. Busy Philips (Kim Kelly) said her acting career never took off because she thought working on other film sets would be just as fun and laid back as it was for her on Freaks and Geeks. Lets just be thankful that the crew didn't fade away from the spotlight and are still working today. many of the cast are actually still good friends (Linda Cardellini and Busy Philips/ Samm Levine and John Daley/ James Franco, Jason Segel, Martin Starr and Seth Rogen) . If you haven't bought the box set yet I suggest you do. You wouldn't believe how much the cast and crew Loved this show.

This interview with Paul Feig made me feel a little better about the cancellation. In a way, It makes a lot of sense. (fast forward to 1:22)