Because early recordings were made individually, one track each on a 12" piece of shellac. These were placed inside paper sleeves and bound into a book for sale - an album. Modern technology meant that all tracks appeared on one disc, but the name continued.
The Latin "albus" means white (see albumen, albino etc) and the form "album" described a blank white tablet for writing notices or signatures. Eventually an album became a place for a collection of things of all kinds, including photographs and music etc