Because of HDMI.
That's the iPod to blame. Apple was pushing all-digital (so they can sell you an expensive set of Apple-branded ear plugs) so they pretty much ignored the analog end of things.
Dolby Digital hit the market long before HDMI, so no.
And it isn't the iPod to blame, as I have tried it with several devices. I used to have a Dell DJ (read: Dell ripping off iPod), and it had the same lower volume/quality with my stereo. I just couldn't go digital with it (and it only held 30GB, and was dropped by Dell, and nobody supported it, and...), so I replaced it. Much better quality now. But I knew it would be as I had compared the DJ (analog) to a simple flash drive (digital) plugged into my stereo, and it sounded better/louder.
Also, as I said, the analog headphones I use have great quality used with my iPod. Sounds as good as my PC/headphones. But that's comparing analog to analog. When I can compare analog to digital, digital wins.
Digital signals win because if the information gets there, it gets there without loss. A digital signal can lose signal strength, be read at the other end, and produce the identical signal it was sent out with in both volume and quality. An analog signal loses volume when losing its strength, and loses quality when you amplify the receiving end to compensate.
Digital signals also win because of being able to carry more data over their media (as in fiber-optic), and carry multiple discreet channels, as GT90 mentioned.
Though I certainly won't argue the bit about Apple pushing ANYTHING so they can sell you more, or more expensive, stuff. I was reluctant to buy an iPod, but since so many car stereos support them (including mine), it was the best choice for me.
However, do you really think Apple would IGNORE the analog side of an iPod? That's 90% of how it's used! If they ignored that, they'd be shooting themselves in the foot by pissing off all the people buying them.