In our computer systems lecture we were introduced to the MIPS processor. It was (re)developed over the course of the term and has in fact been quite easy to understand. It uses a RISC design, that is its elementary commands are regularly encoded and there are only few of them in order to keep the wires simple.

It was mentioned that CISC follows a different philosophy. I looked briefly at the x86 instruction set and was shocked. I can not image how anyone would want to build a processor that uses so complex a command set!

So I figure there have to be good arguments why large portions of the processor market use CISC architectures. What are they? 

There is a general historical trend.

In the olden days, memories were small, and so programs were perforce small. Also, compilers were not very smart, and many programs were written in assembler, so it was considered a good thing to be able to write a program using few instructions. Instruction pipelines were simple, and processors grabbed one instruction at a time to execute it. The machinery inside the processor was quite complex anyway; decoding instructions was not felt to be much of a burden. 

In the 1970s, CPU and compiler designers realized that having such complex instructions was not so helpful after all. It was difficult to design processors in which those instructions were really efficient, and it was difficult to design compilers that really took advantage of these instructions. Chip area and compiler complexity was better spent on more generic pursuits such as more general-purpose registers. The Wikipedia article on RISC explains this in more detail.

MIPS is the ultimate RISC architecture, which is why it's taught so often.

The x86 family is a bit different. It was originally a CISC architecture meant for systems with very small memory (no room for large instructions), and has undergone many successive versions. Today's x86 instruction set is not only complicated because it's CISC, but because it's really a 8088 with a 80386 with a Pentium possibly with an x86_64 processor.

In today's world, RISC and CISC are no longer the black-and-white distinction they might have been once. Most CPU architectures have evolved to different shades of grey.

On the RISC side, some modern MIPS variants have added multiplication and division instructions, with a non-uniform encoding. ARM processors have become more complex: many of them have a 16-bit instruction set called Thumb in addition to the “original” 32-bit instructions, not to mention Jazelle to execute JVM instructions on the CPU. Modern ARM processors also have SIMD instructions for multimedia applications: some complex instructions do pay after all.

On the CISC side, all recent processors are to some extent RISC inside. They have microcode to define all these complex macro instructions. The sheer complexity of the processor makes the design of each model take several years, even with a RISC design, what with the large number of components, with pipelining and predictive execution and whatnot.

So why do the fastest processors remain CISC outside? Part of it, in the case of the x86 (32-bit and 64-bit) family, is historical compatibility. But that's not the whole of it. In the early 2000s, Intel tried pushing the Itanium architecture. Itanium is an extreme case of complex instructions (not really CISC, though: its design has been dubbed EPIC). It even does away with the old-fashioned idea of executing instructions in sequence: all instructions are executed in parallel until the next barrier. One of the reasons Itanium didn't take is that nobody, whether at Intel or elsewhere, could write a decent compiler for it. Now a good old mostly-sequential processor like x86_64, that's something we understand.
