Why are bike shorts so tight and why do have to wear them ?

They're typically made from Neoprene, and they fit snugly to be aerodynamic, and also so they fit close to the skin so as to prevent chafing.
 
They are made mostly from lycra/spandex, and their primary function is to reduce friction with the saddle while you pedal. There is usually some form of padding built in as well. Seams and stitching are located away from friction points.

The fabric and seams of regular shorts and underwear will rub you raw in some very sensitive areas if you ride more than a few miles at a time.
 
I won't wear them. Only road bikers out for speed for whatever reason need worry about wind resistance that much. Maybe long distance riders. But for mountain bikers I just don't see it. I wear hiking pants and a strap on my right ankle to keep my pants out of the crank. At REI they sell padded shorts that otherwise look normal. I don't need padded shorts but 2EHO.
 
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