There can be different factors involved.

With licensed games, for example, sometimes they're just looking for a quick cash-in. Other times, they don't actually have any good ideas for a game but they're being required to make one anyway because of a related release, often with a strict deadline and shorted development period. With E.T., I think they had less than two months to develop the game, with obvious results.

With original IP, sometimes they think they're going to make a good game but it just doesn't turn out as well as planned and there is a need to recoup as much as possible. After a certain point, it might be less expensive to release a bad product than to cancel. There are also IP which will sell regardless of quality, simply because it's from a particular brand.

History shows bad games can sell.... Why not trying ? Superman 64 sold 410k LT which is not so horrible considering the quality of the game...

Sunk cost usually, you don't set out to make a bad game but making games is hard and usually only become good in the last few months after you have already spent a lot of money. As they say the first 90% is the easy part, it's the last 90% that is the hard part.

Things like licensed games are a different beast, most of the resources goes into the license usually which leaves very little for actually making a game but the do it because they believe that the license will sell it by it's self. And a lot of the time that actually works, or at least it did, that market has largely dried up which is why THQ isn't around anymore. Atari had a lot of success before they invested into E.T. it's just a shame that they only bothered to pay 1 guy to actually make the game in 6 months after they had spent tens of millions on the license and manufacturing millions of carts.

They must be aware that their game is bad and it will bomb hard, so they still release it because the game is nearly completed. They aren't going to cancel or delay the game because it's bad. They need to make profit from it, no matter how bad it is.

In the case of E.T., the game was made in less than 2 months (I think) to meet the holiday season deadline. Lack of tools, lack of time, lack of personnel. Atari games were usually made by 1 person who had to do everything. Did the guy who made thought it was bad? All of the CEO who invested heavily on the game's success didn't care and released it. And the rest is history.

If it's shovelware, they know the game is bad so they just rush it and release it, not showing any concern if the game is good. They just want to make profits and capitalize on a movie release or a famous brand.

Developers market their ideas and get projects funded by piblishers, but fairly often they fail to deliver something of a high quality. The publisher releases what they get to try to recoup at least some of their investment.

For licensed games, it's not just the resources, even if it's a large part of the problem. You get the license relatively late,  for a relatively short time, and the license popularity peak can be very short (for example, a month from movie release). So there is a very difficult challenge in term of schedule... to meet with a lesser budget. My previous company released a total crap based on license because the license was to expire, it was too late to do anything about it. One point to understand is that most of crappy games dont hurt the brand so much : the failure is short, does not become news, and it doesn't leave so many client to remember it. Only 1 crap out of 100 become legendary like ET or Superman 64.

The schedule problem is anyway not so specific to licenses. Duke Nukem, and a lot of games faced this problem. If you are becoming late, the technology you base your game on end to be outdated, the competitors release, etc. The cost involve to redevelop can make the studio put it on market before it's too late.

Sonic 06 sucked ass and it sold pretty poorly for a Sonic game, but we still got like 7 main Sonic games after that one!

Well im just gonna show all of you the worse activision game ever made!

Didn't they make like more ET cartridges than there were Atari consoles?

I know it was something stupid like that.

Oh God......