The internet happened and made every service – no matter how local – available everywhere in the world. And then companies happened and turned every online service into a business.
Governments often want to regulate business involving entities physically present in the country. If foreign companies refuse to comply, governments could in principle just block them. But they often don't want to, because they benefit more from continued business on their terms. They would prefer that the foreign companies just comply "voluntarily". For example by realizing that the company could lose access to any financial institution that wants to continue operating in that country. And the companies often comply, because they are amoral profit maximizers without any real principles.
Governments often want to regulate business involving entities physically present in the country. If foreign companies refuse to comply, governments could in principle just block them. But they often don't want to, because they benefit more from continued business on their terms. They would prefer that the foreign companies just comply "voluntarily". For example by realizing that the company could lose access to any financial institution that wants to continue operating in that country. And the companies often comply, because they are amoral profit maximizers without any real principles.