This is one of many widespread customs that we find at Jewish burials. In fact I was recently at a funeral and a young couple was attending an Orthodox one for the first time. They were friends of the person who passed, of blessed memory. This is one of the questions they asked me during the service. A day later they called to tell me how the recent events and ceremony inspired them to learn more about their Jewish heritage.
Regarding the custom of placing the shovel on the ground instead of handing it to the person next in line who is waiting to also fulfill the special mitzvah of burial, I have seen two reasons in a book and heard a third reason from a rabbi in Jerusalem. One reason is that on the day a person is buried it is not considered correct behavior to pass something to another. Why not? One of the messages to the participants of a funeral is to understand that at the time of death we are all equal. Passing the shovel directly to the next person could be seen as type of dominance over the receiver. Placing the spade into the earth amplifies the idea of equality.
A second reason is that the time of the burial is a time of great anguish, and to pass the shovel from one to the other would be symbolic of passing the anguish. A third reason which I heard is somewhat similar, yet different. If one passes the shovel into the hand of another person he is in effect saying, “Bury him!” It shows a lack of sensitivity to the recipient of the shovel, and the recipient might even see it as symbolic gesture that he is being told he is a “burier” – which can be very unnerving.
May we all know and share only happy occasions and soon live to see the fulfillment of the prophetic statement that God will “swallow up death in victory; and … wipe away tears from all faces.” (Isaiah 25:8)