alt Hacker NewsI think it is, again, a way to work around limitations. Economic limitations in this case rather than technical.
Compared to modern HD graphics, pixel art is more affordable because you can hide a lot of details you would normally have to work on behind these fat pixels.
And the most interesting trick, to me, is that pixel art looks sharp! The non-CRT-like square pixels is a feature.
Blurry usually doesn't look good, it is as if your eyes can't focus, or that you are looking through a dirty window, it naturally registers as a problem. Real life has details and you are missing them. With sharp pixel boundaries, you are telling the brain "there is no problem with your eyes, everything is fine".
It is not the only way of introducing artificial details to make low detail pictures look fine: scanline effect, screen door effect, ostensible dithering, etc... But pixel art is a good compromise, in addition to being a recognizable somewhat nostalgic art style.
That's my theory at least.
Note that classical pixel art was not necessary particularly fat/blocky. Since SVGA become common, games like SimCity 2000 or Transport Tycoon Deluxe run in 640x480 on 14" CRT, which is ~60 DPI. Later (in second half of 1990s), higher resolution became common, but also higher screen sizes, so DPI was in 70-80 range. That is not really that different from full HD on 24" LCD (~92 DPI), which dominated later era.