Why are there region restrictions?

Because someone do not want sell their game

Because fuck you, that's why.

I'll never understand region restrictions too.
Apparently they don't want my money.

Because politics.

One of 2 reasons: either your country's government has some problem with is for some bizarre reason only they know of or the developers are idiots and don't want your money. Oh, there's a 3-rd reason which is probably the case here: Games for Windows Live because Microsoft are assholes.

Because it will keep the steam trading thing alive?

Because of censorship and stuff... Ask your local government for more details.

I've always wondered why Puzzle Kingdoms, of all things, is not available in Germany. Is this puzzle game too brutal for our innocent German eyes?

Its a GFWL title and GFWL is not officially supported in Latvia.

Because some company has exclusive rights to distribute game in your region.

Edit: Var no amazona pasūtīt pa 20ls :)

They dont want your money

There are dozens of varying reasons. Sometimes retailers literally have formed a cartel in some countries, and they, in fear of the digital, offer publishers ultimatums like "You can't sell this on Steam in our country (or it needs to be a higher price) or we won't stock your games anymore, and that includes the consoles." and the threat of the lost retail sales weighs heavier than the Steam sales. In this case though, it is because of GFWL. A service like Xbox Live has to go through a lot of channels and hoops, and in some countries those channels suck, or it's too expensive, etc. Or a country has certain companies that are awarded rights for that country and the publisher in question doesn't want to do business with them. It's not just a matter of Publisher X is racist and hates you. There are a lot of factors involved.

They dont want your money

I remember John Carmack himself once saying something about this on Twitter, when somebody asked him why Rage wasn't available in their country and Carmack mentioned something about the publisher not wanting or being able to pay sales taxes (or some other kind of tax) for that region or country. I don't recall the details, though.

The gum'mint maaaaan...