It is because he told the truth when asked by his father if he cut his father's favorite cherry tree down. It is a lesson to children to always tell the truth and the punishment will be milder. It has no basis in History but is a good lesson for children.
Whether it's true or not, whether it's a made up story, I just want to know what the point is. People chop down trees all the time. Why does this tree-chopping get all the hoopla?