Why did Paramount do it? Ostensibly it was to give the film time to be converted into 3D, thus generating increased revenue worldwide. I don't doubt that a quality 3D conversion could be completed in that time, but seems like some pretty poor planning to decide that this late if you ask me.
Spinoff Online has some interesting conspiracy theorizing about why the move. My best guess? The suits at Paramount saw the returns on Hasbro's disastrous Battleship and got cold feet. Companies have been ended for smaller flops. Maybe give viewers time to warm up to the idea of a toy-based film again?
Throughout all of this, my heart goes out to director Jon Chu. I was really rooting for him to break out into mainstream success with this film. He's no slouch, to be sure: his past films have grossed hundreds of millions of dollars worldwide. But Retaliation had the potential to single-handedly reach grosses in the hundreds of millions and cement him as a go-to action director with the chops to deliver a major blockbuster. This decision can't have been an easy one for Chu (and I'm sure he didn't make it, nor was he pleased with it - his Twitter account has been strangely silent, save for a cryptic photo that may have been unintentionally ironic).
Also check out this Hollywood Reporter interview, in which Chu talks about how liberating it was to shoot in 2D. Curiouser and curiouser...
(Thanks to Peter Smith for hooking me up with some of these links)