There are two questions here. The first is why it was not used in war. This is the same question as asking why no nuclear weapons were detonated in war after 1945. There is no single answer to this, though deterrence and lack of desire for that kind of escalation is probably a good-enough answer for our purposes: the Tsar Bomba was not used in war because to use nuclear weapons in war again would be to possibly invite total destruction on one's own nation as well. In any event, it is not a question unique to the Tsar Bomba.

The second question is why the Soviets did not make many Tsar Bombas. They did, of course, make many thousands of nuclear weapons, with their total stockpile at its peak (like the United States') representing tens of thousands of megatons in total explosive power. Why not 100 Mt bombs, then? The answer, in short, is that a weapon of such explosive output is very tactically limited. The destructive capability of nuclear arms does not scale linearly with their explosive output; it scales (for geometric reasons) as a cubic root (the energy goes outward as a sphere, but most of it area you are trying to destroy is a relatively flat circle). So to double the damage of a given weapon, you need to increase its energy by a factor of eight. So the Tsar Bomba at its full strength (100 Mt) was only a bit more than twice as destructive as a weapon with half of its explosive energy (10 Mt).

By itself, you might be inclined to think twice-as-destructive as something already very destructive might be worth it, but another fact comes into it: the weight of a nuclear weapon does increase roughly linearly with the explosive output. So the 100 Mt Tsar Bomba would only be a bit more then 2X as powerful as a 10 Mt weapon, but it would weigh around 10X more.

When it comes to the utility of a nuclear weapon, the explosive power is part of it, but the deliverability is quite a lot as well. If you can't get your weapon to your target, then it is worthless, just a posture. The Tsar Bomba was so large that it did not fit inside of the Soviet bombers and had to be strapped to the exterior. It was a large, visible, slow sort of weapon. It would have only been deployable to places near the USSR, and the bomber carrying it would be a fat target for enemy fighters. It was the nuclear equivalent to putting all of one's eggs in one basket.

The trend in weapons design since the early 1960s was towards compact warheads that could fit onto missiles. These tend to be far lower in yield than multi-megaton warheads, because of the difficulty of throwing that much mass out on a rocket. You can still destroy a city this way: ten 10 Mt bombs do more damage than one 100 Mt bomb.

Anyway, you don't need 100 Mt to destroy any city. 10 Mt will do the job just fine for any metro area of significance. Cities just aren't that big on the whole. 1 Mt will easily destroy the majority of even large cities. Even easier would be ten 400 kt warheads — which would also give a strategist a lot more flexibility.

You just don't need 100 Mt for really anything. It is inefficient overkill. It was always intended as mostly a ploy — a large bomb for its own sake, just to show they were tough. It was not a very practical weapon. This is not to say that they did not deploy an overkill's-worth of weapons — they did, as did the US. But both chose to disperse their thousands of megatons among many weapons, as opposed to concentrating them in a few of big ones.