Clinton supporters say we can't go into the general election with a septuagenarian democratic socialist. Sanders supporters say that Clinton Derangement Syndrome would bring Republicans out of the woodwork to vote against her. O'Malley is subject to neither of these problems and, IMO, is the Democrat who'd have the best chance of winning in November.
On the Republican side, people sometimes talk about the "social conservative/evangelical lane" and the "Establishment lane" as being how the race will be winnowed down to two. On the Democratic side, O'Malley has no obvious lane.
* People who are happy with the party establishment have assumed for years that Clinton will be the nominee, and they're backing her.
* People who reject Clinton as too corporatist/hawkish/etc. want an emphatic rejection of politics as usual. Between Sanders and O'Malley, there isn't all that much daylight in terms of policy, but Sanders is more unconventional on style factors. The very factors that Clinton supporters point to, as problems for Sanders in November, are part of his appeal to the "insurrectionist" forces in the party. Nominating Sanders would be a clear departure from politics as usual.
At this point, it's very unlikely (though not impossible) that O'Malley will catch fire and go to the Convention with a plurality of delegates, let alone a majority. The most plausible path to an O'Malley nomination is that he gets out of the single digits, to do somewhat better, while neither Clinton nor Sanders can achieve a knockout. If the Convention delegates are split 40-40-20 or some such, after the first ballot (or after a few) some of the delegates in each of the larger camps might decide, "Well, at least O'Malley is better than that other leading candidate."
I think it far more likely that either Clinton or Sanders will have a majority of the delegates once the primaries end.
I don't think O'Malley is running for VP. If he were, he wouldn't have criticized "triangulation" as he did, nor would he have gone after Sanders on gun control. If his main goal were his personal advancement, then, when Barbara Mikulski announced her retirement, he would have dropped his Presidential campaign and run for her seat. At that point it was already apparent that his campaign results were disappointing and that Sanders had sewn up the "outsider/insurrectionist" lane.