As I understand it, before they produced kits, AMT made promotional models of cars for Ford, GMC etc. These would be supplied to dealerships as giveaways (worth a fortune now). For whatever reason they were usually in 1/25th scale. Then some bright spark said, hey, why don't we sell them in pieces?. I think, thats how Revell started out too.
As for why 1/25th, maybe it was a convenient size, look at how carkit boxes have always been around about the same size, as opposed to aircraft kit boxes, and they were usually made in a scale to fit the box in the early days, hence the phrase, 'boxscale'.
Pete