I've been calling this the "Dragon Ball" effect, for ages. If you're familiar with the Dragon Ball franchise you'll see the same pattern. Every time Goku meets an enemy, he has to spend time getting slapped around and then powering up. The he beats up the bad guy. Then the next bigger, badder bad guy shows up. Goku has to spend time getting slapped around, and then powering up.... After a while, he's fighting guys that can obliterate half the galaxy with the twitch of one mighty eye-lash....

In D&D (and other games) once you get to a certain level, it's really hard to explain why a character that could easily take over his entire planet, is instead still running around looking for adventure. And then you have to come up with something to challenge the wizard that can cause stars to go supernova with a snap of his fingers. It all gets too ridiculous after a point

To be honest, the level cap on the game (read 2nd ed) was extended, basically, just to sell more splat books (rake in more dough), and wasn't really balanced all that well. By this time, other game companies had sprouted up and were taking a big chunk out of what had been, up until then, TSRs playground. They needed to increase profits, and raising the level cap on D&D was easier (and more successful, sales wise) than designing new games. How many of TSRs other RPG's can you even recall, with out resorting to Google?