I think part of it was that back in the heyday, the game graphics themselves were so primitive, and the gameplay so simple and devoid of long story arcs, that they provided no real constraint on the cabinet art. Nobody expected the cabinet to look much like the game or possess much in the way of narrative coherence, so it was this free flight of fancy. Atari cartridge box art and pinball table art were similar.

Remember how Atari 2600 game manuals used to make up some kind of weird little story to explain what was supposed to be happening in the game? That was kind of the same thing in prose.