My understanding -- and I wasn't there for that particular holy war, so I might have some of the details wrong -- is that while LISP is in many ways the better language, it didn't at the time have the practical implementation support that C did. Efficient LISP code at the time required specialized hardware; C was and is basically a set of macros to constructs common in assembly languages for most commodity architectures. It worked, in other words, without having to build an entire infrastructure and set of development practices around it.
Later implementations of LISP pretty much solved that problem, but by that time C and its derivatives had already taken over the world.
C was a major improvement on the languages of the day: COBOL, Fortran, and plain assembly. Unlike any of those, it was at the same time fully portable, supported structured programming, and allowed freeform text.
But I don't think programmers would have embraced LISP even if its performance was as good as the other languages. For the same reasons programmers don't embrace LISP-derived languages today. It is an empirical fact that the great majority of programmers, particularly the less-than-brilliant ones, dislike pure functional programming.
Another month, another rationality quotes thread. The rules are: