People are insecure, not to mention how it's pretty much considered a virtue (especially for women) to be self-deprecating. When someone says "You look good in that dress." Most are raised to answer along the lines of "Oh no, this old thing is just what I had in the closet." no matter the frantic shopping and grooming that led up to it.
We're not supposed to agree that we look good. That would make us shallow and up ourselves.
because if you talk about how good you look, you're a narcissistic asshole and if you complain about how shitty you look, you're fishing for compliments. i mean, one could always say "thanks" and move on but some people don't know how to respond to stuff like that.