I think it was done for a few reasons:
- It was a new time in the WWF, with all of its Attitude marketing, and after Bret and HBK had their time, it helped to not only have a new champion in Steve Austin, but also a brand new character like Kane holding the gold, however briefly, to establish new blood up top. (Rock and Mankind would soon follow later on in the first timers club)
- To christen Kane as a top monster, capable of beating the best the WWF hard to offer.
- Kick off the Austin/Undertaker buildup
- Show that Steve Austin was always going to be vulnerable as WWF Champion with Vince plotting against him.
- EDIT: Also, yeah, the obvious "ratings!" reason, to keep the storyline unpredictable and lead to a Kane-Austin match on RAW.
Kane, with all of the development that went into creating the "New Undertaker" type character, really should have been the guy to end Austin's reign, but I do wish that they had waited a little longer to do it. Austin wound up losing the title to Undertaker and Kane in that triple threat match later in the year anyway.