The song got popular in multiple circles, including within the "Jesus Movement", which was the launching point of what we know today as "Contemporary Christian Music" or "CCM". There wasn't much Christian rock in late 1972, and while people like Larry Norman were working to change that, Christians took to this song big time, and for good reason.
Interestingly, it peaked in the Hot 100 at #35, but its real mark was on AOR radio, and later, classic rock, as nearly 45 years later, Jesus is still alright with program and music directors.
(Note: 20 years later in 1992, the Christian rap group DC Talk came out with their own version of the song, which was very good, and was a Christian Skate Night staple for years, but isn't quite as good as the version below.) :)