Actually, there are only two reboots during the entire Windows 7 installation process:
Windows 7 prepares the target installation media (hard drive or SSD), formats if necessary, and copies the base installation files for a quicker install, and decompresses them. This also installs the basic Windows Kernel for use in the next step of the installation.
After rebooting, the system is boots into the Windows 7 kernel. Here, all of the packages and drivers are installed. Once this step is completed, you need to reboot the system to Windows will reload all of the newly installed hardware and drivers that it detected during the install. This also lets essential Windows components be activated and installed as services that start upon boot.
You now have a fully installed version of Windows 7 on your hard drive, with all necessary drivers (motherboard, disk interfaces, controllers, etc...). All final installation processes (OOBE, performance indexing, and cleanup) is done. The system does not reboot after this point, since the install is now technically complete.
As for why this is necessary, DVD media is very slow compared to a hard drive. This is why the installation files are actually copied to disk before they are even decompressed. Furthermore, to maintain compatibility with a large number of systems, a reduced system kernel is used to start the installation, which afterward, the drivers specific to your system are used to boot up after the second reboot.
This is similar to the Linux installation process, with the exception of a few more reboots (most Linux distributions can perform the system preparations and driver installations in one step, eliminating the need for the second reboot). Note that the number of reboots during the installation has remained the same since Windows 95 (the only exceptions being if an error occurs, where you may experience more reboots then necessary).