One of the most common reasons I have heard cited for this is that Quran demands it to protect women from prying eyes. Doesn't that sound like punishing the victim rather than the criminal? Instead of that, wouldn't it have been fairer to declare such lusty prying as a sin and ask the men to stop doing that?
The other reason I have heard, though less often, is that it was intended to protect the sensitive skins from heat and elements, though I doubt if such matters of convenience will find mention in Quran?
Of course men are asked to lower their gaze too. Islam prevents the sin from both sides... stops men from prying, and stops women from becoming the object of prying.