It originally used humans' brains as "wetware," or extra processing space. Imagine everyone's playing an MMO, but the computers are all rendering their own copy of stuff so the server doesn't have to do anything but handshakes and data transfer. The matrix is handled, in part, in our heads.

The test audiences got confused so the whole "lol, people are just batteries ¯\_(ツ)_/¯ " plot was put in place instead.