I have heard many explanations, the most plausible being that God wanted to love us because He is love.  It is certainly correct that God loves us, but is this really the reason why He created us?

The Bible tells us exactly why God created man.

Gen 1:26  Then God said, “Let us make man in our image, after our likeness. And let them have dominion over the fish of the sea and over the birds of the heavens and over the livestock and over all the earth and over every creeping thing that creeps on the earth.” 

Gen 1:27  So God created man in his own image, in the image of God he created him; male and female he created them. 

Therefore, God’s purpose in creating was for man to be in His image and to have dominion over the rest of creation.  Even though God said that He wanted to create man in His image AND in His likeness, at the time He created man only in His image.  The likeness comes at a later time.

Adam was created in the full image of God, but he lost it all when he coveted God’s likeness:

Gen 3:4  But the serpent said to the woman, “You will not surely die.”

Gen 3:5  For God knows that when you eat of it your eyes will be opened, and you will be like God, knowing good and evil.” 

After the fall, man started out with little or no image of God, but God had a plan before He created the universe: He would use every event in man’s life to polish up the image:

Rom 8:28 And we know that to them that love God all things work together for good, even to them that are called according to his purpose. 

Rom 8:29  For whom he foreknew, he also foreordained to be conformed to the image of his Son, that he might be the firstborn among many brethren: 

Rom 8:30  and whom he foreordained, them he also called: and whom he called, them he also justified: and whom he justified, them he also glorified. 

God, through ALL THINGS has foreordained the called ones to be conformed to the image of His Son.  This was God’s plan from the beginning and He is following through on it.

Therefore, when hard times come, we need to remind ourselves that God is using those times (as any other times as well) to conform us more into His image.  That is a solid promise and we need to believe, because God is already seeing the finished result and what our next phase will be, since to Him the past, present and future are all the same.  He tells us the end result, but He does not tell us how many times we will deviate from the straight path to get there.  However, He has even included those “deviations” in His plans, even though the natural consequences may be very painful when we mess up and sin.

The image is not the final plan, for God also said that He would create us in His likeness, and He will:

1Co 13:12  For now we see in a mirror dimly, but then face to face. Now I know in part, but then I shall fully know even as I also am fully known. 

Now, only the image is seen as in a dim mirror, and we need to patiently wait for the time of being made into the likeness of God to see things clearly.