Because there are many games, and there is a bigger market of people buying those games.
Since there is more people buying those games, a popular game can be profitable at a lower price now than a popular game could have been profitable at in the past. There is also no mark-up through as many distribution channels. There's no physical shelf space necessary, there's not the same sort of publisher relationships needed. A team (of any size) can create a game and publish it directly.
So because of changes in distribution and an increased market, the price should go down due to reduced expenses. But the other side is that many of these changes also reduce the barrier to entry of new developers. This means that there's more competition which means that the price will go down due to reduced margins from competition.
It's not so much that it's $1-4 for a dumb game and $16 for a quality game. It's that people sell quality games for less than 5 dollars and still make money. It's also the perception that "this game was already made". Chances are the people who are buying it have already played it because these rereleases are generally for fans of the game. So you're paying again for a game that's 20 years old. Does it make sense to pay more than a new game?
That said I'm in total agreement that the biggest thing about it is form factor. People don't buy SNES rpgs on the phone because phones aren't the best way to play SNES rpgs.
Phones have a small screen, long term playing on such a small screen causes eye strain, phones have touch screens, which are great for angry birds, because it's a very intuitive use for touch. Touch screen gamepads are not intuitive, and occlude the screen. Phones are always on you which is very handy for games that you want to pick up or put down, but not so important for marathon sessions. Phones have batteries which need to be considered, so again, you want to avoid the marathon gaming sessions.
The reason we have so many casual games on the phone is because the phone is the ideal target for casual games. Games that you can pick up and put down. Go and play a level of candy crush saga on the toilet. Go and shoot some angry birds waiting for the train. I've tried to play some RPGs this way and you might get through a minor segment of a story line or some plot exposition on the can before your legs start to get numb.
You often find $60 PC games for sale. We haven't moved to a point where games are all $1-4. We just have moved to a point where casual games are $1-4, and bigger games demand a different delivery method than a little phone screen and substandard (compared with the alternatives of a console or PC) hardware. If you're going to pay $60 for a game, you're probably planning on putting some real time aside for it, which means sitting at your desk or on the couch. When you get an app for the phone instead, you do it because you might get some use out of it when you can't spend the time to sit at a desk or on the couch.