I believe that was originally a technical limitation, and only later did it become evident that there is a business value in offering partially-literate individuals a medium that caters to, while providing plausible deniability for, their slow reading and writing speeds.

Twitter has little or no technical reason to be so limited, of course, but doesn't want to alienate the tldr crowd.

Technical limitation: SMS are 160 characters. 20 chars for username and 140 chars for message.