This is because by reading above their level, you are elevating their level. This is how you begin to create expectations for your children - by reading to them above their expected grade level, you expose them to more advanced sentence structure, concepts, words, and experiences. And through their growth due to this reading exposure, they begin to have high expectations for themselves.
In addition, you might even make a hesitant reader into a book worm.
I'll never forget my one daughter who just wasn't finding books she was into. She was older, in sixth grade. AND she was an advanced reader. I began to pick up books that I thought she would like (from easy readers to adult fiction), and she told me that she wasn't interested in them. I had already read them, so I was surprised. I thought that I was reading so much to her younger siblings that I had stopped reading to her. So I began to read aloud the first chapter of the book I was recommending. She was hooked! She loved that book so much.
But we saw the problem again. And we solved it the same way.
And for a year or so, while my young teenage was going through this phase, I did this often. She still fondly remembers the time we spent lying side-by-side reading together (I guess it was also a time when I wasn't reading to her 2 little siblings and it was time just for her!).
Just a note if you are interested: That first book was The Missing 'Gator of Gumbo Limbo by Jean Craighead George.