First off, tl;dr.
The reason for the objectification of women in games is that most developers are men, and most of the people that buy games without caring how good they are are men. By this, I mean to say that if a woman looked at a game with a hot guy on the box, they'll be more likely to consider how good the game is before they buy it. It's another point where marketing may be underhanded, but it works.
However, look at recent games like Heavenly Sword, Final Fantasy XII, and the upcoming FF XIII. All of these star women in the main role, and not necessarily scantily-clad dullards either. Then consider games like Mass Effect and Oblivion, games where the character's gender is determined by the player's choices. The demographics of gamers are changing as gaming becomes more mainstream, and the content of games are slowly coming to match that fact.