I think it's because it's about making a reasoned guess. If you're reading is challenging (which it will be in college), you will encounter words you don't know. You can stop an look all of them up, or you can use the nearby words to derive the meaning from context. That's analogous to solving an analogy. So it was a way of testing readiness for college. Since SATs and IQ are apples and oranges (warning:analogy pun), how they correlate is essentially someone doing a lot of comparisons and making a reasoned guess.
Pre-1995 maybe we did more reading. English involved reading several novels and most of us read outside, in-between, and during class. I read Brave New World at least 3 times because I read it on my own, then for high school, then for college (possibly twice). Latin was still taught as a foreign language even in small high schools.
I took the ACT, so I don't actually have direct experience of the SAT (old or new).
