Like Comic Sans, the papyrus font has been marked by graphics designers as undesirable, mainly because of its predominance in availability for people who didn't go to school to become fancy-pants designers.
The font itself is used anywhere that old, antique, middle eastern or simply Egyptian look is desired.
Papyrus is just one font of many antique fonts available for use. The overuse is what has killed its appeal to people who care about that sort of thing.
Like Comic Sans, the internet's reaction to Papyrus is a meme. The reaction has been so great it's even spilled over into fonts that just look similar.