On phone so in bullet points:
It wasnt popular, but it wasn't disliked either and sitcoms were becoming THE most successful format for TV.
The NBC heads quite liked Seinfeld's humour and Jerry's standup despite subpar ratings. There was also some extra money lying around from a NBC show that was cancelled, which made room for some additional Seinfeld episodes following the Pilot.
In the late 90s, NBC wanted a sitcom to cover Cheers and the Cosby Show, which were finishing soon.
The major turning point in terms of creativity was the Chinese Resteraunt episode, which concerned NBC but was highly regarded by critics and fans. Following this, NBC gave a lot more creative space to Jerry and Larry David.
The major turning point in terms of production was when Seinfeld got moved to the slot following Cheers and massively shot up in ratings (from no. ~50 to 4).
So it was a combination of inter alia good timing, certain NBC heads personally enjoying Seinfeld's type of humour, the rise of the Sitcom and the end of Cheers and The Cosby Show.
Source - Seinfeldia 2016