I spent some time with my brother over the holidays. My brother is an engineer at a major studio, so a lot of my time was spent hanging out in studios with other engineers and recording industry professionals. That has changed my perspective on what is going on in the industry. I used to believe that the loudness war was ruining music, that this was an obvious and subjective fact, and that it was the result of studios competing to create the loudest albums. Over the holidays, I've come to realize that I was partially mistaken. The fact is that modern music needs to be loud, with very little dynamic range and all of the instruments up; not because there is some competition going on between the studios but because that's simply the kind of sound that modern musical tastes favor. The fact appears to be that neither engineers nor the typical listeners favor the same things we do; they actually prefer the louder, less dynamic sound that the studios create today. When I mentioned how the cymbal in one of their recordings sounded like it exploded into static due to the heavy compression, I was surprised to hear that they had specifically compressed it in such a way to bring out the "fuzz" (I don't recall if that was the exact term they used, but it was a term that made what I thought of as static sound like a desirable characteristic), what I thought was the unintended consequence of trying to make it louder is actually the sound they were going for.
It makes sense that others have musical tastes which favor loudness. When you think about it, what is it that most people enjoy when they play their favorite songs? It's not the crystal clear high hat that is moving them, it's not the clarity of the voice or the realism of the soundstage or the feel of the bass. What the average person enjoys is the rythm, the beat, and the chorus; none of which are compromised by a louder sound; in fact, a louder and muddier sound helps emphasize the importance of rythm. Thus I slowly came to the realization that we are not the champions for properly recorded music that I thought we were. We are merely people who prefer a style of tracking, mixing, and mastering that is no longer favored by the industry or population at large. We are simply people with a different opinion on what sounds good.
So, why does modern music sound the way it does? Because that's what people like nowadays.