The New York Times devotes an astounding number of paragraphs to answering this age old question-- and it comes up with a variety of amusing and varyingly probable answers:
One prevalent theory among truckers is that chicks dig them.
... the battered bear and his brethren had at least one foot in the vernacular cultures of Latin America, where the festive and the ghoulish enjoy a symbiotic relationship. Most of the drivers whose trucks he photographed were Hispanic, he said.
"There was some sort of heraldic device to deny the fact of this gigantic machine," he said. "You would have these humanizing forms, anthropomorphic forms - a device that both proclaims the identity of the machine and conceals it."
Mierle Laderman Ukeles, the artist in residence at New York City's Department of Sanitation, said that when she noticed the animals on garbagemen's trucks in the late 1970's, she "felt they were like these spirit creatures that were accompanying them on this endless journey in flux." [Editors Note: the Department of Sanitation has an artist in residence?! Awesome! Jen: we must interview this person!]
Our favorite explanation sounds like something one of our radical post-modernist English professors at Columbia might have said:
That double identification with both victim and agent of violence may reflect the driver's frustrating position in society. Stuffed animals are found mostly on the trucks of men who perform hard, messy labor, which, despite the strength and bravery it demands, places them on the lower rungs of the ladder of occupational prestige.