I have 2 little girls who are 2 and 3, and it is completely beyond me as well. My older girl is my little princess. She is the one who loves to wear pretty dresses and do her nails and wear "makeup", but I could never imagine putting her through all that. These are just the things we do at home to have fun and spend time together. She has her own lip glosses and nail polishes, and loves to have me brush her hair and put her pretties in it. She is a typical girly girl.
My 2 year old is my little tomboy. She wears dresses sometime, but not often. She doesn't get into having her hair done and her nails and "makeup" done very often, but that is fine too. I prefer to encourage them to be who they feel like they are rather than trying to pressure them to conform to what anyone thinks they should be.
I am right there with you about not understanding. I have seen one episode of toddlers and tiaras, and I refuse to watch it again. The struggles to get the children to do exactly what they are supposed to be doing just don't seem worth it to me. I think everyone involved would be much happier if they were just letting the kids be kids, but then again my motto is to each their own. It is not for me to judge, but it is for me to decide when it comes to my girls.