The standard spoken form of modern Chinese, based on the dialect of Beijing.
Why should they? People don't rely on dictionaries when they speak. “Putonghua” may be in dictionaries, but it is still not a commonly used word.
As for why “Mandarin” is used and not “Putonghua”, I believe that “Putonghua” was only recently included in English dictionaries. In China, 普通话 only became a commonly used term during the 20th century. (This is confirmed by Wikipedia.) So it seems likely that one reason “Putonghua”is not commonly used is that it hasn't had enough time to become adopted in English. I also think that another reason “Putonghua” isn't used much is because of phonetics: it doesn't sound like an English word, so people may find it hard to remember and to use.
It could be argued that it is more correct to use “Putonghua” rather than “Mandarin” when referring to standard Chinese. It is conceivable that changes in culture, geopolitics and education may lead to the term “Putonghua” eventually becoming the standard, commonly used term in English for “standard Chinese”. But I don't think it will happen soon. Not before at least a decade I think.
The majority of English speakers do not have much knowledge about the different Chinese languages.
Here are some comments on the usage of the terms Mandarin, Chinese and Putonghua.
Chinese: noun in common use in spoken English. It usually means standard Chinese, i.e. Putonghua. (口语)
Mandarin: noun also used by the general public, but seems a little more formal. (书面语)
Putonghua: not in common use. In general it is only used by someone with a little specialised knowledge of China and/or Chinese languages. Interestingly, in Wikipedia “Putonghua” is a "redirect" to the "Standard Chinese" entry. The article is well worth a look.
They refer to different things, even they have slight difference linguistically. Mandarin refers to the standard literary and official form of Chinese with more broad sense, while Putonghua refers to the standard form of Chinese designated (in 1955) and used by Mainland China; it's worth noting it's still derived from the original Mandarin.
Here's an excellent explanation about it.
To be more specific, Mandarin is the official language designated since Qing dynasty. Originally(not 100% sure), Mandarin stands for officials in Qing dynasty. Later they call the language they use as Mandarin too.
Putonghua, is newly designated as official language within Mainland China. Though it may or may not has slight difference from Mandarin, they are actually the same. For political issues, Taiwan, Hong Kong, and Singapore do not take the notion of Putonghua, which is solely used by Mainland.
Chinese language contains Mandarin(same as Putonghua) + Cantonese + … + tons of dialects.
Never, ever, heard of 'putonghua' outside of China, I doubt the average English speaker would know what that is, notwithstanding OED. 'putonghua' is most definitely not standard English. Oxford is trying to sell books!
'mandar' is Spanish and Portugues for 命令 and the source of 'mandarin = little boss = 大臣，官员， 大人' ('in' a diminutive suffix) and by association, the standardized language they spoke. Because these guys wore an orange coloured robe, the fruit 橘子 got that name in Europe too!
Sent by the emperor to govern somewhere, the educated 'mandarin' spoke a standard language, theoretically.
The use of Mandarin to refer to Chinese dates back to the Jesuits. Mandarin means 'court official', so it was a reasonable translation for 官话, and the term has persisted.
I'd be interested to hear other people's experiences, but I mainly hear this term used to draw a contrast between 'Mandarin' and 'Cantonese', as in "oh, you're studying Chinese? Are you learning Mandarin or Cantonese?".
So ok, the person asking this question clearly doesn't know China very well, but that's fine, the world is a big place, it's hard to know everything. But this terminology they're using
1) identifies that 'Chinese' is a family of languages/dialects
2) makes a first-pass north-vs-south distinction, although with technically incorrect terms that actually have a more specific meaning than that.
3) identifies the 'northern' version as the 'court official' one.
That's... well, surprisingly accurate for someone who clearly doesn't know what they're talking about.
There are differences between Mandarin and Putonghua, some of them political.
Mandarin is originally a Portuguese-based translation of 官话 (guanyu - "language of the officials"), so it is a much older word than Putonghua.
Nowadays, Mandarin is used to differentiate between different "Chinese languages", especially in contrast with Cantonese or Hakka. The implication is that "China" and "Chinese" is an artificial construct, where different languages are actually spoken.
Putonghua, on the other hand, is a word that was created in China to imply the opposite. It means "standard Chinese", as opposed to variants. For instance, in Sichuan you can take "Putonghua" courses to learn the standard pronunciation if you want to speak on TV or radio. The Sichuan dialect would, however, be considered a variant of Mandarin in English.
This concept is similar to the standard languages that many languages have. The underlying idea is that there is one language with a number of regional variants and one standard, official version.
At the same time, some languages spoken in China are acknowledged as different languages and are used in government of their region, such as Tibetan, Mongolian and Uighur. These languages are very different from any form of Chinese, and have their own writing systems.
It's worth noting that in Taiwan (Republic of China), the standard variety of Chinese neither called guanyu nor putonghua, but rather (guoyu - "national language") which has different implications again.