In the most abstract and general sense, the reason for the electoral college was to offset the power of the populous states.   See, the US is not only a single country under a set of federal laws, but also a set of states with their own laws. The Constitution had to be ratified by people from 13 different states, some of which stood to be seriously outnumbered once the government was established. For this reason, the electoral college includes one member per congressional district (this is directly proportional to the state's population) and adds two members to represent the state's Senators. In this way, states with few people have their representation augmented proportionally much more than states with many people. If a state has only enough people for one congressional district, like Vermont, it gets 3 electors; 300% of the total based on population alone. If another state has enough for 100 congressional districts, it gets 102 electors, or 102% of the number based on population alone. Thus, the states with small populations get a bit of a boost.

To this day, the states are the beneficiaries of the college system, not the people. Actually, the beneficiaries are state legislatures, which exercise control of how the electoral college votes. While the constitution mandates the EXISTENCE of the college, the states control how it works. THIS is where the real distortion of the vote comes in. For most states the state's electoral votes ALL go to the person who "wins" the state, so if you get 51% of the Florida vote you get 100% of the state's electoral votes.

This benefits state legislatures in two ways:

1) If the state has a clear majority, and is not a "battleground" state, ie, if the majority of the people in a state lean a certain way politically, the legislature usually reflects that. So if 65% of people are likely to vote Republican (as in, say, Utah) then the legislature is probably domintated by Republicans, too. Thus, it is in their interest to have 100% of the electoral votes go to the Republican. Same goes for NY and the Democrats. It allows the majority, which controls the legislature, to amplify its lead in the final tally.

2) if the state has no clear majority, but is a "battleground" state, there would be no reason for a candidate to favor that state in any way. In other words, if in Ohio 52% is going to vote Republican and 48% Democrat, is it worth a candidate tailoring his agenda and platform to that state's citizens in order to change that margin to 52% Democrat, 48% Republican? Without the electoral college, probably not; that 4% of Ohio voters won't make a big difference nationally. But if the 4% of Ohio voters controls ALL of Ohio's electoral votes, it makes each candidate desperate to appeal to Ohio voters. This allows the issues important to the "battleground" states to dominate political agendas.

Thus, whether the state is a battleground state or a committed state, the natural tendency of the legislature will be to keep the all-or-nothing system of the electoral college.

This is a very difficult problem in American politics. Abolishing the electoral college would require a constitutional amendment, no easy feat. Changing the way the college votes would require 48 individual legislatures to do something that is not in their own interest. That is not likely to happen either.