I don't think people are really voting to cancel out other ballots (well I don't and lets remember that ballots are supposed to be anonymous and if you want a peaceful familly dinner it is sometimes better to keep it that way). But since in most case a majority is required it still mean than 45% of the ballots cancel out 45 other % of the ballots...
Sure the choice is always limited you can't have a limitless number of candidate and have to chose one which matches the best your opinions and still have a chance to get elected. Also in most election there are 2 turns, first one generally more open with many candidates and a second with only 2 candidates, where smaller candidates with no chance to win but still having many ballots can negociate with the bigger candidates to get some representation in governments.
Also in some instance too many candidates can be disastrous, we had a presidential election in 2002 in France (I think) where the different current from the left presented so many candidates that at the second turns, all the candidates from the left were eliminated and people ended with a second turn between the traditional right and the far right (and ended with a president elected from traditional right elected with around 95% of the ballots... because no one wanted of a far right president). So this is also something which can happen if too many tendencies are represented, you might just end up with a much worst outcome (in some countries like spain, belgium, in absence of a majority, no government can be formed at all.
Finally an election is like making a "collective" decision. You weight the right and wrong of each possible decision and settle for one. That's exactly the same...