I can think of lots of reasons.
- Higher shipping charges. Yes, you can add that into your listing, but it makes the listing more complicated.
- International shipping takes longer. Longer to ship, longer to return unwanted items, longer communications delays because they're asleep when you're trying to e-mail them, and vice-versa. More time in transit = higher probability of items going missing.
- Language barriers; many of your potential international buyers will speak English poorly or not at all. That complicates communication, especially if there's a problem with the transaction. You might never figure out if that Portuguese chap you're having a dispute with is a scammer, or simply an honest fellow with poor English.
- Limited Paypal protection. If a seller ships outside of a few select countries, they're on their own as far as Paypal is concerned.
- Some countries have notoriously poor, theft-prone mail systems (India comes to mind). It's easier to block all international shipping than to find out (usually the hard way) which countries should be blacklisted.
- Some countries charge ludicrously high fees for importing even relatively cheap items into the country (Canada, for example). Buyers from those countries often request US sellers to lie on the customs forms, so they don't have to pay their own government's fees. This puts sellers in a dilemma: do you deliberately break US law and lie, just to keep your customer happy, or refuse to lie and risk your customer's wrath?
- Each country has its own rules and regulations about what can and can't be shipped there, and the USPS has it's own interpretations of those rules and regs. Your item could be seized or blocked, and you might never find out that it's happened. For example, did you know it's against USPS regs to ship "coins" to Australia?
- Many sellers either simply don't think that foreigners could be interested in what they have to sell, or their sense of patriotism makes them uneasy about selling off part of their country's history and heritage to foreigners.
I hate having 90% of US sellers block me just because I'm from Australia, but I understand perfectly why they do it. It doesn't really bother me; most of the time I don't usually even notice. If I go to eBay Australia, I can't even see the items being offered by US-only sellers, unless I check a whole bunch of option boxes in the Advanced Search.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis