It's worth contrasting Palin with the other five candidates who declined to enter the race. Haley Barbour announced his intentions in April, while Mike Huckabee, Mitch Daniels, and Donald Trump did the same back in May. Only Sarah Palin and Chris Christie waited until the last possible moment to make their announcements. But while Christie was genuinely undecided until the night before his press conference, Palin likely made her final decision no later than early June of this year.
Why? Unlike the actual late entrants, Palin never had any reason to delay getting into the race. Michele Bachmann had to wait because she feared Palin getting in the race; Jon Huntsman had to return from his post in China; Rick Perry had to at least serve some time in his third term as Texas governor. By contrast, Palin would have had every reason to get in early. In fact, it would have been vital for her to get in the race early enough to prevent Bachmann from getting in and splitting her vote. Unlike the others on the Fox News payroll (Rick Santorum, Newt Gingrich, and Mike Huckabee), Palin was never required to make a public decision in May. She may have made private assurances to Fox News that she was not going to run.
Thus, it is fair to assume that Palin has spent the last several months confident that she would not run. Why didn't she make her announcement? Palin enjoyed the media attention. Her high profile was also necessary for her to continue making an income as a conservative firebrand. Unlike the other candidates, Palin manipulated her supporters into getting their hopes up, only to dash them in the end.
Why didn't Palin run? There were two good reasons. First, all of the polls showed that Palin had no chance of winning either the Republican primary or the general election. It wasn't a close call; it was overwhelming. Palin had no desire to be humiliated in an unsuccessful run which would have lasted for the better part of a year. Second, Palin realized that she could make more money for less work by being a political celebrity rather than a political candidate. The year after her failed run for the vice presidency, Palin abruptly announced that she was resigning from her position as governor of Alaska. She then set about making money that she could not have legally made while serving as governor. Her resignation was one of the prime factors that made her incapable of winning the Republican presidential primary. Indeed, at that point she may have already decided against running for president.
What will be the effect on the race now that Palin isn't running? There will be little impact. Nearly all Republican voters either discounted her or did not plan to vote for her. There are therefore few votes to redistribute. Only the diehard Palin supporters remained. Those votes are likely to go to other unelectable Tea Party candidates, such as Herman Cain. Michele Bachmann is an obvious choice for disaffected Palin supporters, but the feud between Bachmann and Palin poisoned the well.
Elephant Watcher has long calculated that Palin's odds of winning the nomination were 0%. Thus, her departure does not raise any other candidate's chances of winning.