Cyclists shaving their legs is more tradition than anything else--there is a whole industry around creams, soaps, and salves. However, I'll defer to Sheldon Brown's explanation for a few acceptable reasons why they do it:
1. To prevent infection when crashing.
2. To pull off bandages more painlessly after dressing a wound.
3. To get a massage of the legs without hair pulling.
One reason I've often heard is 'To be more streamlined in the wind'--but I don't believe it!